Tax Incentive for Medical Leave in the Era of Coronavirus

With the markets trending toward recession and especially small business feeling the squeeze of slowing sales and labor forces getting sick, it’s a good time to look at your medical leave policies as there is the Employer Credit for Paid Family and Medical Leave.

The quick summary is that if you provide paid medical leave under the Family medical leave act and pay at least 50% of the employees wages while they are on Family and Medical Leave (FML) the employer will get a tax credit of 12%-25% of the employees wages as the paid leave increases to match the full wages of the employees.

Now there are caveats, such as you must have a form FMLA policy and provide 2 weeks paid sick leave for all qualified full-time employees and prorated part-time employees who have worked for the company for at least 1 year. There are also wage caps for the credit, for instance in 2018 it was $72,000 but this can be a potent tool for companies that are facing employees who are quarantined or have dependents who are facing quarantine or extended time off for Coronavirus.

For more information contact a tax professional or see this FAQ by the IRS.  Here are some good tips from SHREM regarding coronavirus.