Instructions for Form 8994

Instructions for Form 8994

(Rev. December 2024)

Employer Credit for Paid Family and Medical Leave

(For use with the January 2021 revision of Form 8994)

Section references are to the Internal Revenue Code

unless otherwise noted.

Future Developments

For the latest information about developments related to

Form 8994 and its instructions, such as legislation

enacted after they were published, go to IRS.gov/

Form8994.

What’s New

Qualifying employee compensation limits updated.

See Qualifying Employee.

Reminder

Credit extension. The Taxpayer Certainty and Disaster

Tax Relief Act of 2020 extended the credit to cover tax

years beginning in 2021 through 2025.

General Instructions

Purpose of Form

An eligible employer (defined later) uses Form 8994 to

figure the employer credit for paid family and medical

leave. The credit ranges from 12.5% to 25% of certain

wages paid to a qualifying employee while the employee

is on family and medical leave.

You can claim or elect not to claim the employer credit

for paid family and medical leave any time within 3 years

from the due date of your return on either your original

return or an amended return.

Partnerships and S corporations must file this form

TIP to claim the credit. All other taxpayers must not

complete or file this form if their only source for

this credit is a partnership or S corporation. Instead, they

must report this credit directly on line 4j in Part III of Form

3800, General Business Credit.

Which Revision To Use

Use the January 2021 revision of Form 8994 for tax years

beginning in 2020 or later, until a later revision is issued.

Use this December 2024 revision of the instructions for tax

years beginning in 2024 or later, until a later revision is

issued. Use prior revisions of the form and instructions for

earlier tax years. All revisions are available at IRS.gov/

Form8994.

Eligible Employer

An eligible employer is an employer with a written policy in

place that provides paid family and medical leave and

satisfies minimum paid leave requirements (see Minimum

Paid Leave Requirements, later). In addition, if the

employer employs any qualifying employees who aren’t

Nov 1, 2024

covered by title I of the Family and Medical Leave Act

(FMLA), the employer’s written policy must include

“non-interference” language.

Non-interference language. If an employer employs at

least one qualifying employee who isn’t covered by title I

of the FMLA (including any employee who isn’t covered by

title I of the FMLA because they work less than 1,250

hours per year), the employer must include

“non-interference” language in its written policy and

comply with this language to be an eligible employer. This

requirement applies to:

• An employer subject to title I of the FMLA that has at

least one qualifying employee who isn’t covered by title I

of the FMLA, and

• An employer not subject to title I of the FMLA (that has

no employees covered by title I of the FMLA).

The “non-interference” language must ensure that the

employer will not interfere with, restrain, or deny the

exercise of, or the attempt to exercise, any right provided

under the policy, and will not discharge, or in any other

manner discriminate against any individual for opposing

any practice prohibited by the policy. The following

“non-interference” language is an example of a written

provision that would satisfy this requirement: [Employer]

will not interfere with, restrain, or deny the exercise of, or

the attempt to exercise, any right provided under this

policy. [Employer] will not discharge, or in any other

manner discriminate against, any individual for opposing

any practice prohibited by this policy.

Written policy documentary requirements. An eligible

employer’s written policy may be set forth in a single

document or in multiple documents. For example, an

employer may maintain different documents to cover

different classifications of employees or different types of

leave, and those documents will collectively constitute the

employer’s written policy. An eligible employer’s written

policy may also be included in the same document that

governs the employer’s other leave policies.

Written policy in place. The employer’s written policy

must be in place before the paid family and medical leave

for which the employer claims the credit is taken. The

written policy is considered to be in place on the later of

the following dates.

• The policy’s adoption date.

• The policy’s effective date.

Example. You adopt a written policy that satisfies all of

the requirements discussed in these instructions on June

15, 2024, with an effective date of July 1, 2024. Assuming

all other requirements for the credit are met, you can claim

the credit with respect to family and medical leave paid in

accordance with that policy to qualifying employees for

leave taken on or after July 1, 2024.

Instructions for Form 8994 (Rev. 12-2024) Catalog Number 69663D

Department of the Treasury Internal Revenue Service www.irs.gov

Providing notice of written policy to employees.

Employers aren’t required to provide notice of the written

policy to qualifying employees to claim the credit.

However, if an employer chooses to provide notice of the

written policy to qualifying employees, the policy will not

be considered to provide for paid leave to all qualifying

employees (see Minimum Paid Leave Requirements,

later), unless the availability of paid leave is

communicated to employees in a manner reasonably

designed to reach each qualifying employee. This may

include, for example, email communications, use of

Internet websites, employee handbooks, or posted

displays in employee work areas.

Qualifying Employee

A qualifying employee is an employee (as defined in

section 3(e) of the Fair Labor Standards Act of 1938

(FLSA), as amended) who has been employed by the

employer for 1 year or more, and whose compensation for

the preceding year doesn’t exceed an amount equal to

60% of the amount applicable for that year under section

414(q)(1)(B)(i).

An employee’s compensation is determined under

section 415(c)(3).

Compensation Limit Per Year

Year

Prior Year 414(q)(1)(B)

Amount

Prior Year Compensation

Limit

2024

$150,000

$90,000

2025

$155,000

$93,000

2026

$160,000

$96,000

For this purpose, an employer whose tax year isn’t the

calendar year can choose to use as the preceding year

either:

• The employer’s immediately preceding fiscal year, or

• The calendar year ending in the employer’s immediately

preceding fiscal year.

Employed for 1 year or more. Until further guidance is

issued, an employer may use any reasonable method to

determine whether an employee has been employed for 1

year or more. Treating employees as employed for 1 year

or more if they have been employed for 12 months, as set

forth in section 825.110(b) of the FMLA regulations, 29

CFR 825.110(b), is an example of a reasonable method.

However, any requirement that an employee work 12

consecutive months to be a qualifying employee would not

be viewed as a reasonable method for determining

whether an employee has been employed for 1 year.

Minimum number of hours per year not required. An

employee isn’t required to work a minimum number of

hours per year to be a qualifying employee. Until further

guidance is issued, any requirement that an employee

work a minimum number of hours to be a qualifying

employee would not be viewed as a reasonable method

for determining whether an employee has been employed

for 1 year. The rules under section 101(2)(A)(ii) of title I of

the FMLA, which require an employee to work a minimum

of 1,250 hours of service to be an eligible employee under

the FMLA, don’t apply.

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Written policy may not exclude any classification of

employees. An employer’s written policy may not

exclude any classification of employees (for example,

collectively bargained employees) if they are qualifying

employees.

Example 1. You have an insured short-term disability

plan that provides disability benefits to any employee who

becomes disabled after having completed 6 months of

continuous service. Under the plan, a disability caused by

or resulting from a pre-existing condition isn’t covered if

the disability begins in the first 12 months after the

effective date of coverage. For purposes of the plan, a

pre-existing condition is one for which an employee

consulted a physician, received medical treatment, or took

prescribed drugs in the 3 months immediately prior to the

effective date of coverage. The exclusion from coverage

for pre-existing conditions applies to all your employees

during the applicable 12-month period. Employees subject

to the pre-existing condition exclusion are effectively not

covered under the plan when they first become qualifying

employees. In addition, in some cases, the requirement

that the employee complete 6 months of continuous

service might exclude some qualifying employees.

Therefore, the plan will not in all cases cover all qualifying

employees. You can’t claim the credit for paid family and

medical leave provided under the written policy with

respect to any of your employees.

Example 2. The facts are the same as in Example 1,

except that you adopt a written policy that provides for

paid leave to any qualifying employee who isn’t covered

under the short-term disability plan as a result of the 6

months of service requirement or the pre-existing

condition exclusion. This leave is paid from your general

assets and the length of the paid leave is the same as the

leave that would have been available under the short-term

disability plan if neither the 6 months of service

requirement nor the pre-existing condition exclusion

applied to a qualifying employee. Taking into account the

leave available under your insured short-term disability

plan and your supplemental self-insured paid leave

arrangement, your written policy doesn’t exclude any

classification of qualifying employees and, assuming all

other requirements for the credit are met, you can claim

the credit for paid family and medical leave provided under

the written policy.

Family and Medical Leave

Family and medical leave generally means leave for any

one or more FMLA purposes (as defined below).

However, if an employer provides paid leave as vacation

leave, personal leave, or medical or sick leave (other than

leave specifically for one or more of the FMLA purposes),

that paid leave isn’t considered family and medical leave.

FMLA purposes. The following are FMLA purposes for

which paid family and medical leave may be provided to a

qualifying employee.

• The birth of a son or daughter of the employee and in

order to care for the son or daughter.

• The placement of a son or daughter with the employee

for adoption or foster care.

Instructions for Form 8994 (December 2024)

• Caring for the spouse, or a son, daughter, or parent of

the employee, if the spouse, son, daughter, or parent has

a serious health condition.

• A serious health condition that makes the employee

unable to perform the functions of the employee’s

position.

• Any qualifying exigency (as the Secretary of Labor will,

by regulation, determine) arising out of the fact that the

spouse, or a son, daughter, or parent of the employee is a

member of the U.S. Armed Forces (including the National

Guard and Reserves) who is on covered active duty (or

has been notified of an impending call or order to covered

active duty).

• Caring for a service member with a serious injury or

illness if the employee is the spouse, son, daughter,

parent, or next of kin of the service member.

The FMLA purposes are the purposes for which an

employee may take leave under the FMLA. These terms

have the same meaning as defined in section 825.102 of

the FMLA regulations, 29 CFR 825.102.

Leave specifically designated for FMLA purposes.

Other than paid leave to care for additional individuals,

paid leave made available to an employee is considered

family and medical leave only if the leave is specifically

designated for one or more FMLA purposes, may not be

used for any other reason, and is not paid by a state or

local government or required by state or local law.

Example 1. Your written policy provides 6 weeks of

annual paid leave for the birth of an employee’s child, and

to care for that child (an FMLA purpose). The leave may

not be used for any other reason. No paid leave is

provided by a state or local government or required by

state or local law. Your policy provides 6 weeks of family

and medical leave.

Example 2. Your written policy provides 3 weeks of

annual paid leave that is specifically designated for any

FMLA purpose and may not be used for any other reason.

No paid leave is provided by a state or local government

or required by state or local law. Your policy provides 3

weeks of family and medical leave.

Example 3. Your written policy provides 3 weeks of

annual paid leave for any of the following reasons: FMLA

purposes, minor illness, vacation, or specified personal

reasons. No paid leave is provided by a state or local

government or required by state or local law. Your policy

doesn’t provide family and medical leave because the

leave isn’t specifically designated for one or more FMLA

purposes and can be used for reasons other than FMLA

purposes. This is true even if an employee uses the leave

for an FMLA purpose.

Leave to care for additional individuals. An

employer’s written policy may provide paid leave that

otherwise would be specifically designated for an FMLA

purpose (for example, to care for a spouse, child, or

parent who has a serious medical condition), except for

the fact that the leave is available to care for additional

individuals not specified in the FMLA (for example, a

grandchild or grandparent who has a serious medical

condition). In this limited circumstance, the fact that the

leave could also be used to care for additional individuals

for whom care under the FMLA purpose isn’t required

doesn’t prevent the leave from being considered

Instructions for Form 8994 (December 2024)

specifically designated for an FMLA purpose. However,

the employer can’t claim the credit for any leave taken to

care for an individual other than a qualifying employee’s

spouse, parent, or child.

Example. Your written policy provides 4 weeks of

annual paid leave to care for family members with a

serious health condition. The policy’s definition of “family

members” includes the individuals specified in the FMLA

(spouse, children, and parents), and also includes

grandparents, grandchildren, and domestic partners. Your

employee uses 1 week of annual paid leave to care for

their grandmother, and, at a later time, uses 1 week of

annual paid leave to care for their son. Your policy

provides paid leave specifically designated for an FMLA

purpose. Although the paid leave taken by the employee

to care for their grandmother isn’t family and medical

leave, the paid leave taken by the employee to care for

their son is family and medical leave for which you can

claim the credit assuming all other requirements for the

credit are met.

Leave provided by employer’s short-term disability

program. Paid leave provided under an employer’s

short-term disability program, whether self-insured by an

employer or provided through a short-term disability

insurance policy, may be characterized as family and

medical leave if it otherwise meets the requirements to be

family and medical leave.

Minimum Paid Leave Requirements

For an employer to be eligible to claim the credit, the

employer’s written policy must meet certain minimum

requirements with respect to paid family and medical

leave. These requirements are:

• The policy must provide at least 2 weeks of annual paid

family and medical leave to all qualifying employees who

aren’t part-time employees, and at least a proportionate

amount of paid family and medical leave to qualifying

employees who are part-time employees;

• The policy must require a rate of payment that isn’t less

than 50% of the wages normally paid to the qualifying

employee for services performed for the employer; and

• If the employer employs one or more qualifying

employees who aren’t covered by title I of the FMLA, the

employer’s written policy must also include the “noninterference” language discussed earlier.

Any leave that is paid by a state or local government or

required by state or local law isn’t taken into account for

any purpose in determining the amount of paid family and

medical leave provided by the employer.

Minimum Period of Leave Requirement

An employer’s written policy must provide qualifying

employees who aren’t part-time employees with at least 2

weeks of annual paid family and medical leave and must

provide at least a proportionate amount of annual paid

family and medical leave to qualifying employees who are

part-time employees. For part-time employees, the paid

leave ratio must be at least equal to the ratio of the

expected weekly hours worked by a qualifying employee

who is a part-time employee to the expected weekly hours

worked by an equivalent qualifying employee who isn’t a

part-time employee. In determining the amount of paid

family and medical leave provided by the employer, any

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leave paid by a state or local government or required by

state or local law isn’t taken into account.

Example. Your written policy provides 4 weeks of

annual paid family and medical leave to a qualifying

employee expected to work 40 hours per week, and 2

weeks of paid family and medical leave to an equivalent

qualifying employee who is a part-time employee and is

expected to work 20 hours per week. All of your

employees work either 20 or 40 hours per week. Your

policy meets the minimum paid leave requirements

because each employee who isn’t a part-time employee

may take at least the minimum 2 weeks of annual paid

leave and each part-time employee may take at least a

proportionate number of weeks of leave. Specifically, with

respect to the proportionate amount, the ratio of expected

weekly hours worked by a qualifying employee who is a

part-time employee (20 hours) to the expected weekly

hours worked by an equivalent qualifying employee who

isn’t a part-time employee (40 hours) is 1:2, and the policy

provides 2 weeks of paid leave to qualifying employees

who are part-time employees and 4 weeks of paid leave to

equivalent qualifying employees who aren’t part-time

employees, satisfying the 1:2 ratio.

Part-time employees. A part-time employee is an

employee who is customarily employed for fewer than 30

hours per week. Until further guidance is issued, an

employer may use any reasonable method to determine

how many hours an employee customarily works per week

for the employer. Reasonable methods include the

methods set forth in 29 CFR section 2530.200b-2 for

calculating hours of service in connection with certain

plans, such as qualified pension plans, subject to the

Employee Retirement Income Security Act of 1974, as

amended.

Minimum Rate of Payment Requirement

The employer’s written policy must provide that each

qualifying employee who is on paid family and medical

leave will be paid at least 50% of the wages normally paid

to the employee for services performed for the employer.

In determining the rate of payment under the policy, leave

paid by a state or local government or required under state

or local law isn’t taken into account.

Wages normally paid to an employee. Wages normally

paid to an employee means the wages normally paid to

the employee for services performed for the employer.

Overtime (other than regularly scheduled overtime) and

discretionary bonuses are excluded from wages normally

paid. Until further guidance is issued, for employees who

are paid (in whole or in part) on a basis other than a

salaried or hourly rate, an employer must determine

wages normally paid to the employee using the rules for

determining regular rate of pay set forth in regulations

issued under the FLSA. See 29 CFR section 778.109.

Leave paid by a state or local government or required by state or local law. Leave paid by a state or

local government or required by state or local law isn’t

taken into account in determining whether an employer’s

written policy provides a rate of payment of at least 50% of

the wages normally paid to an employee for services

performed for the employer. To be eligible to claim the

credit, an employer must independently satisfy the

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minimum paid leave requirements, including providing a

rate of payment of at least 50% of wages normally paid to

an employee.

Example 1. Under state law, an employee on family

and medical leave is eligible to receive 6 weeks of benefits

paid by a state insurance fund at a rate of 50% of the

employee’s normal wages. Additionally, your written policy

concurrently provides each qualifying employee with 6

weeks of annual paid family and medical leave at a rate of

payment of 30% of the wages normally paid to the

employee for services performed for the employer.

Consequently, in the aggregate, a qualifying employee

can receive 6 weeks of annual paid family and medical

leave at a rate of payment of 80% of the wages normally

paid to the employee. Your policy doesn’t independently

satisfy the requirement that the rate of payment be at least

50% of the wages normally paid to an employee.

Example 2. The facts are the same as in Example 1,

except that your written policy provides each qualifying

employee with 6 weeks of annual paid family and medical

leave at a rate of payment of 50% of the wages normally

paid to the employee that runs concurrently with the state

leave. Consequently, in the aggregate, a qualifying

employee can receive 6 weeks of annual paid family and

medical leave at a rate of payment of 100% of the wages

normally paid to the employee. Your policy independently

satisfies the requirement that the rate of payment be at

least 50% of the wages normally paid to an employee.

Only wages paid under your written policy (50% of wages

normally paid to the employee) can be used to figure the

credit. Wages paid pursuant to state law aren’t used to

figure the credit.

Example 3. Under state law, employers are required to

provide employees 6 weeks of family and medical leave,

and the state law permits this leave to be either paid or

unpaid. Your written policy provides each qualifying

employee with 6 weeks of annual paid family and medical

leave at a rate of payment of 50% of the wages normally

paid to the employee. Your policy independently satisfies

the requirement that the rate of payment be at least 50%

of the wages normally paid to an employee.

Rate of Payment or Period Not Required To Be

Uniform

An employer’s rate of payment or period of paid family and

medical leave isn’t required to be uniform with respect to

all qualifying employees and for all FMLA purposes.

However, to the extent an employer’s policy provides

different rates of payment or periods of paid family and

medical leave for different FMLA purposes, the minimum

paid leave requirements must be satisfied with respect to

each FMLA purpose for which the employer intends to

claim the credit. Conversely, if an employer’s policy

provides a uniform rate of payment and period of paid

family and medical leave for all qualifying employees and

for all FMLA purposes (or a uniform rate of payment and

period for several specified FMLA purposes), the policy as

a whole must satisfy the minimum paid leave

requirements, and it isn’t necessary for the minimum paid

leave requirements to be satisfied separately with respect

to each FMLA purpose.

Example 1. Your written policy provides each qualifying

employee with 6 weeks of annual paid leave for the birth

Instructions for Form 8994 (December 2024)

or adoption of the employee’s child, or to care for that child

(an FMLA purpose) at a rate of payment of 100% of

wages normally paid to the employee for services

performed for you. For all other FMLA purposes, the policy

provides each qualifying employee with 2 weeks of annual

paid leave at a rate of payment of 75% of wages normally

paid to the employee. Your written policy satisfies the

minimum paid leave requirements.

Example 2. Your written policy provides each qualifying

employee with 2 weeks of annual paid leave for the birth

or adoption of the employee’s child, or to care for that child

(an FMLA purpose) at a rate of payment of 100% of

wages normally paid to the employee, and also provides

each qualifying employee who isn’t covered by a collective

bargaining agreement with 2 weeks of annual paid leave

for a serious health condition that makes the employee

unable to perform the duties of their position (also an

FMLA purpose) at a rate of payment of 100% of wages

normally paid to the employee. The portion of your policy

that provides paid leave to each qualifying employee for

the birth or adoption of the employee’s child, or to care for

that child, satisfies the minimum paid leave requirements.

However, the portion of the policy providing only certain

qualifying employees (those who aren’t covered by a

collective bargaining agreement) with paid leave for a

serious health condition that makes the employee unable

to perform the duties of their position doesn’t satisfy the

minimum paid leave requirements, and you can’t claim the

credit for any leave taken under that portion of the policy.

Example 3. Your written policy provides each qualifying

employee with 2 weeks of annual paid leave for any FMLA

purpose at a rate of payment of 100% of the wages

normally paid to the employee, and each qualifying

employee who has 10 years of service with an additional 2

weeks of annual paid leave for any FMLA purpose at a

rate of payment of 100% of wages normally paid to the

employee. Your policy satisfies the minimum paid leave

requirements.

Applicable Percentage

The applicable percentage is based on the rate of

payment for the leave under the employer’s policy. The

base applicable percentage of 12.5% applies if the rate of

payment is 50%. If the rate of payment under the policy is

greater than 50%, the applicable percentage is increased

by 0.25 percentage points for each percentage point by

which the rate of payment exceeds 50%, up to a maximum

applicable percentage of 25%.

Example 1. Your written policy provides each qualifying

employee with 4 weeks of annual paid family and medical

leave at a rate of payment of 75% of the wages normally

paid to the employee. Because the rate of payment under

the policy exceeds 50% by 25 percentage points, the base

applicable percentage of 12.5% is increased by 6.25%

(0.25% × 25), for an applicable percentage of 18.75%

(12.5% + 6.25%).

Example 2. The facts are the same as in Example 1,

except that your written policy provides each qualifying

employee who has at least 10 years of service a rate of

payment of 100% of the wages normally paid to the

employee for services performed by the employee, rather

than 75%. Because the rate of payment for a qualifying

employee who has at least 10 years of service is 100%

Instructions for Form 8994 (December 2024)

(which is 50 percentage points greater than 50%), the

base applicable percentage for these employees is

increased by 12.5% (0.25% × 50), for an applicable

percentage of 25% (12.5% + 12.5%). For a qualifying

employee who has less than 10 years of service, the

applicable percentage is the same as determined in

Example 1.

How To Figure the Credit

In the case of an eligible employer, the credit is an amount

equal to the applicable percentage of the amount of

wages paid to qualifying employees during any period in

which such employees are on family and medical leave.

The term “applicable percentage” means 12.5% increased

(but not above 25%) by 0.25 percentage points for each

percentage point by which the rate of payment exceeds

50%. See Applicable Percentage, earlier.

The amount of family and medical leave that may be

taken into account with respect to any qualifying employee

for any tax year may not exceed 12 weeks. The credit with

respect to any qualifying employee for any tax year can’t

exceed an amount equal to the product of the employee’s

normal hourly wage rate for each hour (or fraction thereof)

of actual services performed for the employer and the

number of hours (or fraction thereof) for which family and

medical leave is taken.

Figuring the credit. The credit is equal to the applicable

percentage of the amount of wages paid to a qualifying

employee during any period (up to 12 weeks) that the

employee is on family and medical leave.

Example 1. Your written policy provides each qualifying

employee with 4 weeks of annual paid family and medical

leave at a rate of payment of 75% of wages normally paid

to the employee. During 2024, your employee takes 4

weeks of leave under the policy. The employee is normally

paid $1,000 per week. You pay the employee a total of

$3,000 ($750 per week for 4 weeks) for family and medical

leave. Assuming all other requirements for the credit are

met, you can claim a credit of $562.50 with respect to the

employee (18.75% of $3,000).

Example 2. The facts are the same as in Example 1,

except that your written policy provides each qualifying

employee who has at least 10 years of service with a rate

of payment of 100% of the wages normally paid to the

employee. During 2024, Employee A, who has been

employed for 12 years, takes leave under the policy for 4

weeks, and Employee B, who has been employed for 5

years, takes leave under the policy for 2 weeks. Both

Employee A and Employee B are normally paid $1,000

per week. You pay Employee A a total of $4,000 and

Employee B a total of $1,500 for family and medical leave.

Assuming all other requirements for the credit are met,

you can claim a total credit of $1,281.25 with respect to

Employee A and Employee B. The credit for Employee A

is $1,000 (25% of $4,000), and the credit for Employee B

is $281.25 (18.75% of $1,500).

Wages defined. The term “wages” has the same

meaning given to that term by section 3306(b) (regarding

FUTA wages), determined without regard to the $7,000

FUTA wage limitation. Section 3306(b) generally defines

wages as all remuneration for employment, as defined by

section 3306(c), subject to certain limitations. However,

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for this purpose, the term “wages” doesn’t include any

amount taken into account for purposes of determining

any other general business credit.

For more information about general business credits,

see the Instructions for Form 3800.

Example 1. You pay wages to your employee that

qualify as a research expense for purposes of determining

the amount of your research credit under section 41(a).

The research credit under section 41(a) is a general

business credit allowed under section 38. Some of the

wages paid to your employee for the performance of

qualified services under section 41(b) were paid while the

employee was on family and medical leave. To figure your

credit, you must exclude from the wages paid while your

employee was on family and medical leave any wages

treated as a qualified research expense for purposes of

determining the amount of your research credit under

section 41(a).

Example 2. The employer is tax-exempt under section

501(a) as an educational organization described in

section 501(c)(3). Because employment with the

employer isn’t employment for purposes of FUTA tax,

wages paid by the employer aren’t FUTA wages. Although

the employer is exempt from federal income tax, it earns

unrelated business taxable income from a trade or

business that isn’t substantially related to the performance

of the employer’s exempt purpose. The employer

maintains a written paid leave policy that provides at least

2 weeks of paid family and medical leave to all qualifying

employees, including those performing services for the

unrelated trade or business. The employer would like to

claim the credit against its unrelated business income tax

liability. Because the employer doesn’t pay FUTA wages,

wages paid by the employer aren’t wages for purposes of

the credit. Consequently, amounts paid by the employer to

its employees while on paid family and medical leave

aren’t eligible for the credit.

Wages paid by third-party payer. Wages paid by a

third-party payer (including an insurance company, a

professional employer organization, or a Certified

Professional Employer Organization) to qualifying

employees for services performed for an eligible employer

are considered wages for purposes of the credit. However,

only the eligible employer, and not the third-party payer,

can take these wages into account when figuring the

credit.

Leave paid by a state or local government or required by a state or local law. Leave paid by a state or

local government or required by a state or local law isn’t

taken into account when figuring the credit.

Wages paid through a short-term disability program.

Wages paid through an employer’s short-term disability

program for family and medical leave are taken into

account in figuring the credit provided that the program (in

combination with any other employer-paid leave

arrangement) meets the minimum paid leave

requirements.

Employee becomes a qualifying employee after leave

is taken. An eligible employer may claim the credit only

with respect to wages paid to an employee who is a

qualifying employee at the time family and medical leave

6

is taken. Wages paid to an employee for family and

medical leave before an employee becomes a qualifying

employee are excluded in determining the employer’s

credit. However, if an employer’s written policy provides

that employees may take paid family and medical leave

before they become qualifying employees and doesn’t

provide a dedicated amount of leave meeting the

minimum paid leave requirements that may only be taken

after an employee becomes a qualifying employee, the

leave will not fail to (a) be specifically designated for an

FMLA purpose, or (b) meet the minimum paid leave

requirements, solely because an employee may take paid

leave before becoming a qualifying employee.

Example. Your written policy provides all employees

who have completed at least 6 months of employment

with 4 weeks of annual paid family and medical leave at a

rate of payment of 100% of wages normally paid to the

employee for services performed by the employee. Your

employee completes 6 months of employment with you as

of January 1, 2024, and 1 year of employment (becoming

a qualifying employee) as of July 1, 2024. On June 15,

2024, your employee begins a 4-week period of paid

family and medical leave under the policy. Assuming all

other requirements for the credit are met, you can use

wages paid to the employee for family and medical leave

on or after July 1, 2024, the date that employee becomes

a qualifying employee, to figure the credit. Wages paid for

family and medical leave taken before the employee

becomes a qualifying employee aren’t eligible for the

credit.

Eligible employer for whom qualifying employees

perform services. Only an eligible employer for whom

qualifying employees perform services can claim the

credit with respect to wages paid.

Normal hourly wage rate of an employee not paid an

hourly wage rate. Until further guidance is issued, an

employer may use any reasonable method to convert the

normal wages paid to an employee who isn’t paid an

hourly wage rate to an hourly rate.

Aggregation Rules

Section 45S(c)(3) provides that all persons who are

treated as a single employer under section 52(a) and (b)

are treated as a single taxpayer. In accordance with this

aggregation rule, employers are aggregated for purposes

of section 45S(h)(1), which provides that a taxpayer may

elect to have section 45S not apply for any tax year.

Consequently, employers aren’t aggregated for any other

purpose, including figuring the credit.

Members of Controlled Groups or

Businesses Under Common Control

Each member of a controlled group of corporations and

each member of a group of businesses under common

control generally makes a separate election to claim or not

to claim the credit in accordance with rules set forth under

section 51(j)(2) and (3). However, in the case of a

consolidated group (as defined in Regulations section

1.1502-1(h)), the election is made by the agent (as

defined in Regulations section 1.1502-77) of the group. An

election to claim or not to claim the credit is made for the

tax year in which the credit is available by claiming or not

Instructions for Form 8994 (December 2024)

claiming the credit on either an original return or an

amended return filed for that tax year.

More Information

For more information about this credit, see the following.

• Section 45S.

• Notice 2018-71, 2018-41 I.R.B. 548, available at

IRS.gov/irb/2018-41_IRB#NOT-2018-71.

Specific Instructions

Line A

Line 2

Enter total paid family and medical leave credits from:

• Schedule K-1 (Form 1065), Partner’s Share of Income,

Deductions, Credits, etc., box 15 (code BB); or

• Schedule K-1 (Form 1120-S), Shareholder’s Share of

Income, Deductions, Credits, etc., box 13 (code BB).

Partnerships and S corporations report the above

credits on line 2. All other filers figuring a separate credit

on line 1 also report the above credits on line 2. All others

not using line 1 to figure a separate credit must report the

above credits directly on Form 3800, Part III, line 4j.

Answer “Yes” if you have a written policy providing at least

2 weeks of annual paid family and medical leave for all of

your qualifying employee(s) to whom wages are paid

(prorated for any part-time employees). See Minimum

Period of Leave Requirement and Qualifying Employee,

earlier. If you answer “No,” don’t file Form 8994 unless you

are filing it for a partnership or S corporation that received

from another entity a credit that must be reported on

line 2. For more information, see the instructions for line 2.

Line B

Answer “Yes” if the written policy provides paid family and

medical leave of at least 50% of the wages normally paid

to each qualifying employee. See Family and Medical

Leave and Minimum Rate of Payment Requirement,

earlier. If you answer “No,” don’t file Form 8994 unless you

are filing it for a partnership or S corporation that received

from another entity a credit that must be reported on

line 2. For more information, see the instructions for line 2.

Line C

Answer “Yes” if you paid family and medical leave to at

least one qualifying employee during the tax year. See

Family and Medical Leave and Qualifying Employee,

earlier. If you answer “No,” don’t file Form 8994 unless you

are filing it for a partnership or S corporation that received

from another entity a credit that must be reported on

line 2. For more information, see the instructions for line 2.

Line D

Answer “Yes” if you either (1) did not employ any

employees who weren’t covered by the FMLA, or (2)

employed at least one employee who wasn't covered by

the FMLA and you included in your written policy and

otherwise complied with “non-interference” language. See

Non-interference language under Eligible Employer,

earlier. If you answer “No,” don’t file Form 8994 unless you

are filing it for a partnership or S corporation that received

from another entity a credit that must be reported on

line 2. For more information, see the instructions for line 2.

Line 1

Use the Paid Family and Medical Leave Credit Worksheet

to figure any credit amount to enter on line 1.

In general, you must reduce your deduction for salaries

and wages by the amount on line 1. You must make this

reduction even if you can’t take the full credit this year and

must carry it back or forward. If you capitalized any costs

on which you figured the credit, reduce the amount

capitalized by the credit attributable to these costs.

Instructions for Form 8994 (December 2024)

7

Keep for Your Records

Paid Family and Medical Leave Credit Worksheet

You may use this worksheet to figure your credit for certain wages paid during your tax year to any qualifying

employee(s) while the employee is on family and medical leave. If you need more rows, use a separate sheet and include

the additional amounts in the totals below.

(a)

Qualifying

Employee

(b)

Paid Family and

Medical Leave

(c)

Applicable Percentage

(shown as a decimal (25% = 0.25))

(d)

Credit Amount

(multiply column (b) by column (c))

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

Total amount shown in column (d) from all sheets

8

........................................

Instructions for Form 8994 (December 2024)

Instructions for Paid Family and

Medical Leave Credit Worksheet

Although you only need to provide summary

TIP information to claim the credit, keep separate

records that include the necessary information to

support the amount of credit you are claiming. The Paid

Family and Medical Leave Credit Worksheet is one

method of reflecting the necessary information and is

provided to assist you in this process. You should retain

this worksheet (or any other document you use for

capturing this information) in your records. The information

needed to support the amount of credit you are claiming

includes the:

• Name and social security number of each qualifying

employee,

• Wages paid to each qualifying employee,

• Name and employer identification number of each

qualifying employer,

• Applicable percentage, and

• Family and medical leave policy.

Column (a), Qualifying Employees

Enter the name or other identifying information for each

qualifying employee to whom wages were paid while on

family and medical leave. See Qualifying Employee and

Family and Medical Leave, earlier.

Column (b), Paid Family and Medical Leave

Enter the total family and medical leave wages paid during

the tax year for each employee listed in column (a). See

Family and Medical Leave and Minimum Rate of Payment

Requirement, earlier.

Column (c), Applicable Percentage

The applicable percentage is based on the rate of

payment for the leave under the employer’s policy. The

base applicable percentage of 12.5% applies if the rate of

payment is 50%. If the rate of payment under the policy is

greater than 50%, the applicable percentage is increased

by 0.25 percentage points for each percentage point by

Instructions for Form 8994 (December 2024)

which the rate of payment exceeds 50%, up to a maximum

applicable percentage of 25%. See Applicable

Percentage, earlier, for examples. You can use the

following Applicable Percentage Worksheet to figure the

applicable percentage(s) to enter in column (c).

Applicable Percentage Worksheet

1. Enter the percentage required

under your written policy for the

payment of family and medical

leave* . . . . . . . . . . . . . . . .

1.

2. Minimum percentage required

to claim the credit . . . . . . . .

2.

%

50

%

3. Subtract line 2 from line 1. If the

result is less than zero, stop

here, skip lines 4 and 5, and

3.

enter -0- on line 6 . . . . . . . .

%

4. Multiply the number (percentage

points) on line 3 by 0.25

percentage points. For example,

if line 3 is 25%, then 25 × 0.25 =

6.25 percentage points or

6.25% . . . . . . . . . . . . . . . .

4.

%

5. Base applicable

percentage . . . . . . . . . . . . .

5.

6. Add lines 4 and 5. Enter this

applicable percentage shown as

a decimal (for example, 18.75%

would be shown as 0.1875) in

column (c) of the Paid Family

and Medical Leave Credit

Worksheet for all qualified

employees to whom the rate of

payment shown on line 1

applies . . . . . . . . . . . . . . . .

6.

12.5

%

%

* Complete a separate worksheet for each separate

percentage required and used under your written policy for

the payment of family and medical leave.

9

Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal Revenue laws of the

United States. You are required to give us the information. We need it to ensure that you are complying with these laws

and to allow us to figure and collect the right amount of tax.

You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act

unless the form displays a valid OMB control number. Books or records relating to a form or its instructions must be

retained as long as their contents may become material in the administration of any Internal Revenue law. Generally, tax

returns and return information are confidential, as required by section 6103.

The time needed to complete and file this form will vary depending on individual circumstances. The estimated burden

for individual and business taxpayers filing this form is approved under OMB control numbers 1545-0074 and 1545-0123

and is included in the estimates shown in the instructions for their individual and business income tax returns. The

estimated burden for all other taxpayers who file this form is shown below.

Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Preparing and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1 hr., 54 min.

1 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler,

we would be happy to hear from you. See the instructions for the tax return with which this form is filed.

10

Instructions for Form 8994 (December 2024)