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Now is the Time to Review Paid Leave Policies

February 19, 2018

Under the tax act signed into law at the end of December 2017, employers that provide paid family and medical leave to their employees are entitled to a federal tax credit for a portion of those wages paid. This applies in 2018 and runs through 2019. Even though it is only effective through 2019, for now, it is a valuable tax credit to consider taking advantage of, and it may end up being extended.In order to receive the credit, employers must provide at least two weeks of paid family and medical leave. The compensation provided must be at least 50% of the employee’s regular earnings. The credit ranges from 12.5%, if 50% of the wages are paid, up to 25%, if the employee is paid at 100% of their regular earnings.Additionally, the credit only applies for workers who have been employed for at least a year and who earned no more than $72,000 in 2017, but this amount will be adjusted for inflation going forward. Employers must make the benefit available to both full-time and eligible part-time workers in order to claim the tax credit. An employer does not need to be a covered employer under the FMLA in order to be eligible, so long as the employer has a written policy providing for at least two weeks of paid leave for family and medical leave purposes, as defined under the FMLA. Finally, the two weeks of paid leave cannot be provided as vacation, personal, medical or sick leave, so an employer can’t count their regular PTO leave for this credit. A new policy must be written in order to take advantage of this credit.If you are interested in learning more about this credit, or you’d like assistance creating a policy that allows your organization to take advantage of it, please contact us.

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