New Tax Credit Available to Employers Who Offer Paid Leave

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Whether you are a solo practicing physician or a member of a large group practice, understanding your tax credit eligibility is important. Around this time of year, we suggest exploring new or revised tax credits that can help offset the amount of money owed to the federal and state governments. Unfortunately, many organizations fail to recognize every tax credit they are eligible to receive. This oversight can happen for several reasons, including obsolete technology, inadequate processes, and difficulty keeping up with the complex tax credit landscape, especially for medical practices with limited resources.

The Tax Cuts and Jobs Act (TCJA) adds another level of complexity to this year’s tax planning. This article will help clear a few things up.

A new employer credit, introduced by the TCJA, is available to employers who offer paid family and medical leave to their employees who earned $72,000 or less in 2017 or 2018.

To qualify, employers must have a written policy that

  • covers all workers employed for a year or more,
  • provides at least two weeks of annual paid family and medical leave for eligible full-time employee and offers a proportionate amount of leave for eligible part-time employees, and
  • pays at least 50 percent of the employee’s wages during the leave.

The new credit encourages businesses to offer paid time to their employees for family responsibilities including the birth or adoption of a child, caring for a spouse, child or parent with a serious health condition, or a serious health condition that makes the employee unable to work.

Under the new credit, employers receive a tax credit equal to a percentage of the wages paid to employees while on family or medical leave.

There are other tax deductions physicians can claim to reduce the amount of taxable income.  The most common include:

  • Pre-tax contributions to retirement plans
  • Charitable donations
  • Tax-loss harvesting
  • Home mortgage interest
  • Student loan interest

Taking advantage of tax credits can help your organization reduce its tax liability, lower its tax rate, and improve the bottom line. Consult with one of our tax professionals today to determine your tax credit eligibility.