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Family and Medical Leave Tax Credits: Rewarding Employers

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The Tax Cuts and Jobs Act (TCJA) was jam-packed with tons of benefits for publicly-traded companies and privately-held business owners. However, many employees have complained about not seeing an impact of their own tax bill. While the Family and Medical Leave Credit will not help those employees reduce their tax bill it will incentivize and reward their employers for providing a sought after benefit: paid family and medical leave.

Many companies are required to provide unpaid, or in some states paid, family and medical leave (FML) to their employees. While these benefits may have been forced upon some employers, others have embraced and recognized the social need for paid family and medical leave for their employees. For those companies already providing paid leave to their employees, and the IRS is ready to say thank you!

The TCJA implemented a tax credit for certain employers who provide paid family and medical leave to their employees. The tax credit could range from 12.5% to 25% of the wages paid to employees during their leave. However, with any tax law there is no easy answer or calculation. The law comes with many restrictions based on employee wage levels, calculations to determine program, employee, and employer eligibility, and, of course, additional compliance.

While the law may bring more complexity, the potential benefits for employers already providing paid FML is tangible. For those companies not already providing paid FML, the credit will not eliminate the cost of implementing paid FML, but it should be part of your analysis.

Ellin & Tucker is here and ready to help you navigate the intricacies of this new credit and evaluate whether such a program meets the goals of your business.

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