A Paid Family Leave Tax Credit Calculator
By Megan G. Holstein
Rarely do human resources professionals and employment lawyers contribute to an employer’s bottom line. But the new federal tax credit for employer-provided paid family and medical leave offers a unique opportunity to do just that and help reduce your company’s tax liability. The recently-enacted Tax Cuts and Jobs Act provides a tax credit to employers that voluntarily offer paid family and medical leave. Our Jackson Lewis colleagues in the Benefit Law practice group recently summarized this new law. We have taken it a step further and created a Paid Leave Tax Credit Calculator for employers to quickly estimate the potential tax savings their voluntary paid leave programs can generate. Remember that this law provides a tax credit; that means it’s a dollar-for-dollar reduction in the company’s income tax obligation.
Follow these four steps to determine if your company can take advantage of the paid family leave tax credit. No employer is too big or too small to receive this tax credit — employers of all sizes are eligible!
Look at the company’s existing policies that include voluntary pay benefits (i.e., pay that is not required by law), such as a salary continuation disability policy or a parental leave policy. Stated another way, do you provide paid time off for any of the following leave reasons? If so move to Step 2.
- Employee serious health condition, including pregnancy
- Parental leave/bonding leave
- Care of a family member with a serious health condition
- Care of an injured service member
- Because of a qualifying exigency that arises when a family member is deployed abroad on active military duty
Gather or estimate your company’s 2017 income replacement dollar amount that was used to pay out under one or all of the above-mentioned policies to use as an estimate for calculating a 2018 tax credit.
Plug the pay information into Jackson Lewis’s Estimated Paid Leave Tax Credit Calculator.
If the estimated calculation indicates a positive amount, contact your vendor to review your policy to ensure it complies with the tax credit for paid family and medical leave. If you don’t have a policy but have contemplated offering enhanced benefits to your workforce, such as paid parental leave, now is the time! Remember that this is a tax credit, that means it’s a dollar-for-dollar reduction in the company’s income tax obligation, so it’s worth looking into in order to take advantage of potential tax savings the company’s voluntary paid leave program can generate.
***This article originally appeared on the Jackson Lewis’ Disability, Leave & Health Management blog and was reposted on the DMEC website with their permission.***