How to Calculate for Paid-Leave Tax Credit

HR professional don’t normally contribute to a company’s
bottom line, but with the new federal tax credit they have a chance to help
reduce the company’s tax liability. The Tax Cuts and Jobs Act provides a tax
credit to employer who offer paid family and medical leave for their workers.
This tax credit results in a dollar-for-dollar reduction for a company’s taxes.

To calculate
the Paid-Leave tax credit, follow the next four steps.

Step 1
the company’s existing policies that include voluntary pay leave
benefits (i.e., pay that is not required by law), such as a salary
continuation disability policy or a parental leave policy. If the company
provides paid time off for any of the following reasons, then move to Step 2:

  • Employee’s serious health condition, including pregnancy.
  • Parental leave or 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.

Step 2
the company’s 2017 income replacement dollar amount that was used to pay out
under one or all of the policies listed in Step 1. This is used to calculate a
2018 tax credit in Step 3.

Step 3
the potential annual tax savings using a Paid Family Leave Tax Credit Calculator.

Step 4
If the
estimated calculation is a positive amount, then consult with counsel to ensure
your policy complies with Section 45S before relying on the credit.

without existing voluntary pay leave benefits may consider offering enhanced
benefits, such as paid parental leave, to take advantage of the tax credit.
It’s worth looking into in order to take advantage of potential tax savings the
company’s voluntary paid leave program can generate. 

Who said that HR can’t help your company’s bottom line?
At Converge HR Solutions, we offer cost effective solutions to help optimize
your company’s functions and save money. Converge HR Solutions offers HR
Outsourcing and Consulting services that facilitates all of your companies HR
needs. If you would like to learn more about what products and services
Converge HR Solutions can offer you, please visit our website at or contact us directly by email at or phone at 610-296-8550

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