IRS Announces Employer Credit for Certain Paid Leave

September 27, 2018

The IRS has issued a notice that enables employers that provide paid family and medical leave to employees to qualify for a new credit for tax years 2018 and 2019. The Service said that eligible employers who set up qualifying paid family leave programs or amend existing programs by this December 31 can claim the credit for qualifying leave paid family and medical leave already paid, retroactive to the beginning of the employer’s 2018 tax year.

IRS Notice 2018-71 sets forth how employers can calculate the credit, as well as limitations. The credit was enacted by last December’s Tax Cuts and Jobs Act.

The IRS said that, for tax year 2018, the employee’s 2017 compensation must have been $72,000 or less. The Service also said in the Notice:

  • The employer’s policy must provide at least two weeks of annual paid family and medical leave for each full-time qualifying employee.
  • The policy must provide for payment of at least 50 percent of the qualifying employee’s wages while the employee is on leave.
  • Any paid leave paid required by state or local law is not taken into account for any purpose in determining the amount of paid family and medical leave provided by the employer.