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Explanation, please: What’s the new credit for paid leave?

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in Office Management,Payroll Management

It’s safe to say that company policy isn’t made in the Payroll Department. But the new tax credit for paid FMLA leave, enacted as part of the Tax Cuts and Jobs Act (TCJA), allows you to be the bridge between HR and corporate tax, and, in the process, raise your profile within the company.

Credit calculations. The minimum credit is 12.5% of wages paid to employees who receive half their wages during their FMLA leave. The credit increases by 0.25% for each percentage point above which employees’ rate of pay exceeds 50%. Maximum credit: 25%, if employees receive 100% of their pay. Minimum leave: two weeks. Maximum leave: 12 weeks, or the regular FMLA entitlement.

The credit applies for 2018 and 2019. Catch: You can’t take the credit for paid leave provided to highly compensated employees; it applies only to employees who earned no more than $72,000 last year. This figure is adjusted for inflation.

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