[Video] Tax Reform and Your Business: Employer Tax Credit for Paid Family and Medical Leave
An employer tax credit for paid family and medical leave is included in the tax bill. How much is the credit, who's eligible, and what are the important dates? Paychex senior compliance analyst Laurie Savage answers these and other questions about this provision.
More tax reform videos: General overview | Tax tables and Form W-4 changes | Pass-through entities and accelerated depreciation | States' response | Affordable Care Act changes
I'm Laurie Savage, senior compliance analyst here at Paychex. And today, we're going to talk a little bit about the tax reform and the new tax credit for paid family and medical leave. So with this new tax credit, employers have two years – only 2018 and 2019 – where the credit is available. It sunsets in 2020 where they may be able to get a portion of the amount they pay to these paid leaves back in a tax credit in the range of 12.5 to 25 percent of those wages paid while the employee was on leave.
Now, there are several carve-outs and caveats to this, and it is particularly difficult because we're lacking guidance on what exactly those reforms look like and a lot of open questions on what the wages are. But we know some of the basics.
What we do know is that they spelled out the employers that will be excluded and that includes anyone who is contributing to leave required by the state or local. So if they're required to contribute, those amounts do not qualify for the tax credit.
We still have some open questions on above and beyond in those states but those do not. And eligible employees are, again, the statute spelled those out clearly that the written policy on these leaves that the employers must have – need to offer it to two weeks to not only the full-time employees but on a pro-rata basis to their part-time employees.
So there's a lot of caveats that have to be considered, and we have a lot of open questions on the wages as well as what forms are going to be required to file and whether these work on a fiscal or calendar year depending on how you file your business returns. So it's all yet to be seen.
But there is this availability for the tax credit and if those paid leaves – if you're already offering paid leave, I mean certainly it would be leaving federal money on the table not to take advantage of it. We just need to wait and see how those details play out.