Employer Credit for Paid Family and Medical Leave

Under pre-Act law, for tax years beginning before Jan. 1, 2021, the Code provides an employer credit for paid family and medical leave, which permits eligible employers to claim an elective general business credit based on eligible wages paid to qualifying employees with respect to family and medical leave. The credit is equal to 12.5% of eligible wages if the rate of payment is 50% of such wages and is increased by 0.25 percentage points (but not above 25%) for each percentage point that the rate of payment exceeds 50%. The maximum amount of family and medical leave that may be taken into account with respect to any qualifying employee is 12 weeks per tax year.

New law. The Act extends this credit through 2025, applying to wages paid in tax years beginning after Dec. 31, 2020. (Code Sec. 45S(i), as amended by Act Sec. 119)

 Exclusion for Certain Employer Payments of Student Loans

Under Code Sec. 127, educational assistance provided under an employer's qualified educational assistance program, up to an annual maximum of $5,250, is excluded from the employees income.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act, PL 116-136, 3/27/2020) added to the educational payments excluded from an employee gross income, “eligible student loan repayments” (below) made after Mar. 27, 2020, and before Jan. 1, 2021. These payments are subject to the overall $5,250 per employee limit for all educational payments. Eligible student loan repayments are payments by the employer, whether paid to the employee or a lender, of principle or interest on any qualified higher education loan as defined in Code Sec. 221(d)(1) for the education of the employee (but not of a spouse or dependent). (Code Sec. 127(c)(1)(B))

New law. The Act extends the exclusion for loan repayments through 2025. (Code Sec. 127(c)(1)(B), amended by Act Sec. 120)