Newsflash: Enhancements to the Paid Family and Medical Leave Tax Credit

Here’s an overview of the employer credit for Paid Family and Medical Leave, including the recent changes.

What is the employer credit for PFML?

Employers who meet the requirements can claim a general business tax credit from 12.5% to 25% of wages paid to qualifying employees for up to 12 weeks of family and medical leave per taxable year.

Employers can offer up to 12 weeks of paid family and medical leave to employees for the following reasons:

• Having a baby, adopting or fostering a child
• Taking care of their own serious health condition or for their spouse, child, or parent
• Dealing with a situation of a close relative who is a member of the Armed Forces and on covered active duty
• Taking care of a close relative who is seriously ill or an injured covered servicemember

Key enhancements:

• The credit is now permanent.
• Expanded eligibility: Employers can claim the credit for employees with six months of service and for part-time employees working 20 hours or more per week.
• Expanded coverage: Employers can claim the credit for insurance premiums paid to provide leave, or wages paid during leave.
• State and local mandates: Employers can count leave provided under state or local mandates toward the eligibility for this federal tax credit, but not toward the credit calculation.

Ways to claim the credit

Employers can claim the credit using one of these methods:

• New premium-based: Based on qualifying premiums the employer paid for PFML insurance policies
• Wage-based: Based on the wages paid while the employee is on PFML

This is just an introduction to a complex series of rules. Business owners should work closely with qualified tax advisors to make sure they are properly applying the law.