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If your business provides leave to employees, it may qualify for a tax credit

Posted on September 4, 2019

According to Teipen Selanders Poynter & Ayres CPA Mike Poynter, employers who provide paid family and medical leave to their employees may qualify for a credit that can reduce the taxes they owe.

Called the Employer Credit for Family and Medical Leave, in order to qualify, your business must have a written policy that meets IRS requirements, including:

  • At least two weeks of paid family and medical leave to full-time employees.
  • A prorated amount of paid leave for part-time employees.
  • Pay for leave that’s at least 50 percent of the wages normally                        paid to employees.
  • The program must be available for wages paid in taxable years beginning after Dec. 31, 2017, and before Jan. 1, 2020.

What qualifies as paid leave?

The leave can be for any or all the reasons specified in the Family and Medical Leave Act, including:

  • Birth of an employee’s child.
  • Care for the child.
  • Placement of a child with the employee for adoption or foster care.
  • Care for the employee’s spouse, child, or parent who has a serious health condition.
  • A serious health condition that makes the employee unable to perform the functions of their job.
  • Any qualifying emergency due to an employee’s spouse, child, or parent being on covered active duty in the Armed Forces. This includes the taxpayer being notified of an impending order for covered active duty.
  • Care for a service member who is the employee’s spouse, child, parent, or next of kin.

How much is the tax credit?

The Employer Credit for Family and Medical Leave is generally equal to 12.5 to 25 percent of paid family and medical leave for qualifying employees. The percentage is based on how much employers pay each employee for family and medical leave.

Claiming the credit:

To claim the business credit, qualifying employers must file two forms along with their tax return.

It’s important to stay up to date with federal and state tax reforms, changes and legislation. That’s why Teipen Selanders Poynter & Ayres CPAs attend quarterly classes, seminars and IRS training to keep informed.

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