New Tax Cuts and Jobs Act can affect credits

How the Tax Cuts and Jobs Act affects your credits

The Tax Cuts and Jobs Act of 2017, enacted in December 2017, touched so many pieces of our tax law, the Internal Revenue Service is still issuing guidance on how the reforms will impact small businesses. The 400-page bill was the biggest tax overhaul in two decades and its impacts on individual taxpayers are wide-ranging. This is the third part of how the tax reform bill can affect your business with a focus on credits that were created for employers. As the IRS implements this major tax legislation, the IRS will issue more updates and resources check with your local tax preparer if you have any questions.

Family and medical leave credit

The Tax Cuts and Jobs Act of 2017 created a tax credit for employers that offer paid family and medical leave. It is a general business credit employers may claim, based on wages paid to qualifying employees while they are on family and medical leave, subject to certain conditions.

Here are some facts about the employer credit and how it could benefit you:

To claim the credit, employers must have a written policy that meets certain requirements, like employers must provide at least two weeks of paid family and medical leave annually to all qualifying employees who work full time. (It can be prorated for employees who work part time) and offer the employee no less than 50 percent of the wages normally paid to them. To qualify, the employee must have been employed for one year or more and had compensation that did not exceed a certain amount. For 2018, limit was set at no more than $72,000 in 2017.

The leave must be granted for one or more of the following reasons:

• Birth of an employee’s child and to care for the newborn.
• Placement of a child with the employee for adoption or foster care.
• To care for the employee’s spouse, child, or parent who has a serious health condition.
• A serious health condition that makes the employee unable to perform the functions of his or her position.
• Any qualifying event due to an employee’s spouse, child, or parent being on covered active duty – or being called to duty – in the Armed Forces.
• To care for a service member who is the employee’s spouse, child, parent, or next of kin.

If these requirements are met, then the employers can receive a credit that is a percentage of the amount of wages paid to a qualifying employee while on family and medical leave for up to 12 weeks per taxable year. The credit is generally effective for wages paid in taxable years of the employer beginning after December 31, 2017. It is not available for wages paid in taxable years beginning after December 31, 2019.

Rehabilitation Tax Credit

The Tax Cuts and Jobs Act of 2017 changes how taxpayers can claim a credit rehabilitating property. The change requires taxpayers take the 20-percent credit ratably over five years instead of in the year they placed the building into service and eliminates the 10 percent rehabilitation credit for the pre-1936 buildings. This provision is effective for amounts that taxpayers pay or incur for qualified expenditures after December 31, 2017.

If you have any questions about how the 2017 Tax Reform impacts your business, contact Dempsey Vantrease & Follis today.