Temporary Tax Credit Offered to Employers for Paid Family and Medical Leave

The Tax Cuts and Jobs Act (Act) was signed into law by President Trump on December 22, 2017. The Act makes several changes that impact employee benefits.

Under the Act, employers that provide paid family and medical leave to their employees may qualify for a temporary tax credit. The credit, which applies to wages paid in 2018 and 2019, should be equal to a percentage of wages paid to employee who are on family and medical leave. Paid leaves including vacation leave, sick leave, personal leave, or required by the state, do not apply.

To qualify for a tax credit, employers must have a written policy in place providing at least two weeks of paid family and medical leave for full-time employees (adjusted for part-time employees). The rate of payment must be at least 50% of an employee’s normal pay rate.

Other notable changes made in the Act include:

• Employers cannot deduct expenses associated with qualified transportation fringe benefit programs
• Employees cannot exclude bicycle commuting reimbursements from their gross income
• Qualified moving expense reimbursements cannot be excluded from employees’ gross income

For more information on any of these topics, download this bulletin.