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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 covered by title I of the Family and Medical Leave Act
unless otherwise noted. (FMLA), the employer’s written policy must include
“non-interference” language.
Future Developments
Non-interference language. If an employer employs at
For the latest information about developments related to least one qualifying employee who isn’t covered by title I
Form 8994 and its instructions, such as legislation of the FMLA (including any employee who isn’t covered by
enacted after they were published, go to IRS.gov/ title I of the FMLA because they work less than 1,250
Form8994. hours per year), the employer must include
What’s New “non-interference” language in its written policy and
comply with this language to be an eligible employer. This
Qualifying employee compensation limits updated. requirement applies to:
See Qualifying Employee. • An employer subject to title I of the FMLA that has at
least one qualifying employee who isn’t covered by title I
Reminder of the FMLA, and
Credit extension. The Taxpayer Certainty and Disaster • An employer not subject to title I of the FMLA (that has
Tax Relief Act of 2020 extended the credit to cover tax no employees covered by title I of the FMLA).
years beginning in 2021 through 2025. 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
General Instructions under the policy, and will not discharge, or in any other
manner discriminate against any individual for opposing
Purpose of Form
any practice prohibited by the policy. The following
An eligible employer (defined later) uses Form 8994 to “non-interference” language is an example of a written
figure the employer credit for paid family and medical provision that would satisfy this requirement: [Employer]
leave. The credit ranges from 12.5% to 25% of certain will not interfere with, restrain, or deny the exercise of, or
wages paid to a qualifying employee while the employee the attempt to exercise, any right provided under this
is on family and medical leave. policy. [Employer] will not discharge, or in any other
You can claim or elect not to claim the employer credit manner discriminate against, any individual for opposing
for paid family and medical leave any time within 3 years any practice prohibited by this policy.
from the due date of your return on either your original Written policy documentary requirements. An eligible
return or an amended return. employer’s written policy may be set forth in a single
Partnerships and S corporations must file this form document or in multiple documents. For example, an
TIP to claim the credit. All other taxpayers must not employer may maintain different documents to cover
complete or file this form if their only source for different classifications of employees or different types of
this credit is a partnership or S corporation. Instead, they leave, and those documents will collectively constitute the
must report this credit directly on line 4j in Part III of Form employer’s written policy. An eligible employer’s written
3800, General Business Credit. policy may also be included in the same document that
governs the employer’s other leave policies.
Which Revision To Use Written policy in place. The employer’s written policy
Use the January 2021 revision of Form 8994 for tax years must be in place before the paid family and medical leave
beginning in 2020 or later, until a later revision is issued. for which the employer claims the credit is taken. The
Use this December 2024 revision of the instructions for tax written policy is considered to be in place on the later of
years beginning in 2024 or later, until a later revision is the following dates.
issued. Use prior revisions of the form and instructions for • The policy’s adoption date.
earlier tax years. All revisions are available at IRS.gov/ • The policy’s effective date.
Form8994. Example. You adopt a written policy that satisfies all of
the requirements discussed in these instructions on June
Eligible Employer 15, 2024, with an effective date of July 1, 2024. Assuming
An eligible employer is an employer with a written policy in all other requirements for the credit are met, you can claim
place that provides paid family and medical leave and the credit with respect to family and medical leave paid in
satisfies minimum paid leave requirements (see Minimum accordance with that policy to qualifying employees for
Paid Leave Requirements, later). In addition, if the leave taken on or after July 1, 2024.
employer employs any qualifying employees who aren’t
Instructions for Form 8994 (Rev. 12-2024) Catalog Number 69663D
Nov 1, 2024 Department of the Treasury Internal Revenue Service www.irs.gov

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Providing notice of written policy to employees. Written policy may not exclude any classification of
Employers aren’t required to provide notice of the written employees. An employer’s written policy may not
policy to qualifying employees to claim the credit. exclude any classification of employees (for example,
However, if an employer chooses to provide notice of the collectively bargained employees) if they are qualifying
written policy to qualifying employees, the policy will not employees.
be considered to provide for paid leave to all qualifying Example 1. You have an insured short-term disability
employees (see Minimum Paid Leave Requirements, plan that provides disability benefits to any employee who
later), unless the availability of paid leave is becomes disabled after having completed 6 months of
communicated to employees in a manner reasonably continuous service. Under the plan, a disability caused by
designed to reach each qualifying employee. This may or resulting from a pre-existing condition isn’t covered if
include, for example, email communications, use of the disability begins in the first 12 months after the
Internet websites, employee handbooks, or posted effective date of coverage. For purposes of the plan, a
displays in employee work areas. pre-existing condition is one for which an employee
consulted a physician, received medical treatment, or took
Qualifying Employee prescribed drugs in the 3 months immediately prior to the
A qualifying employee is an employee (as defined in effective date of coverage. The exclusion from coverage
section 3(e) of the Fair Labor Standards Act of 1938 for pre-existing conditions applies to all your employees
(FLSA), as amended) who has been employed by the during the applicable 12-month period. Employees subject
employer for 1 year or more, and whose compensation for to the pre-existing condition exclusion are effectively not
the preceding year doesn’t exceed an amount equal to covered under the plan when they first become qualifying
60% of the amount applicable for that year under section employees. In addition, in some cases, the requirement
414(q)(1)(B)(i). that the employee complete 6 months of continuous
An employee’s compensation is determined under service might exclude some qualifying employees.
section 415(c)(3). Therefore, the plan will not in all cases cover all qualifying
employees. You can’t claim the credit for paid family and
Compensation Limit Per Year medical leave provided under the written policy with
respect to any of your employees.
Year Prior Year 414(q)(1)(B) Prior Year Compensation Example 2. The facts are the same as in Example 1,
Amount Limit except that you adopt a written policy that provides for
2024 $150,000 $90,000 paid leave to any qualifying employee who isn’t covered
2025 $155,000 $93,000 under the short-term disability plan as a result of the 6
2026 $160,000 $96,000 months of service requirement or the pre-existing
condition exclusion. This leave is paid from your general
For this purpose, an employer whose tax year isn’t the assets and the length of the paid leave is the same as the
calendar year can choose to use as the preceding year leave that would have been available under the short-term
either: disability plan if neither the 6 months of service
• The employer’s immediately preceding fiscal year, or requirement nor the pre-existing condition exclusion
• The calendar year ending in the employer’s immediately applied to a qualifying employee. Taking into account the
preceding fiscal year. leave available under your insured short-term disability
plan and your supplemental self-insured paid leave
Employed for 1 year or more. Until further guidance is arrangement, your written policy doesn’t exclude any
issued, an employer may use any reasonable method to classification of qualifying employees and, assuming all
determine whether an employee has been employed for 1 other requirements for the credit are met, you can claim
year or more. Treating employees as employed for 1 year the credit for paid family and medical leave provided under
or more if they have been employed for 12 months, as set the written policy.
forth in section 825.110(b) of the FMLA regulations, 29
CFR 825.110(b), is an example of a reasonable method. Family and Medical Leave
However, any requirement that an employee work 12 Family and medical leave generally means leave for any
consecutive months to be a qualifying employee would not one or more FMLA purposes (as defined below).
be viewed as a reasonable method for determining However, if an employer provides paid leave as vacation
whether an employee has been employed for 1 year. leave, personal leave, or medical or sick leave (other than
Minimum number of hours per year not required. An leave specifically for one or more of the FMLA purposes),
employee isn’t required to work a minimum number of that paid leave isn’t considered family and medical leave.
hours per year to be a qualifying employee. Until further FMLA purposes. The following are FMLA purposes for
guidance is issued, any requirement that an employee which paid family and medical leave may be provided to a
work a minimum number of hours to be a qualifying qualifying employee.
employee would not be viewed as a reasonable method • The birth of a son or daughter of the employee and in
for determining whether an employee has been employed order to care for the son or daughter.
for 1 year. The rules under section 101(2)(A)(ii) of title I of • The placement of a son or daughter with the employee
the FMLA, which require an employee to work a minimum for adoption or foster care.
of 1,250 hours of service to be an eligible employee under
the FMLA, don’t apply.

2 Instructions for Form 8994 (December 2024)

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• Caring for the spouse, or a son, daughter, or parent of specifically designated for an FMLA purpose. However,
the employee, if the spouse, son, daughter, or parent has the employer can’t claim the credit for any leave taken to
a serious health condition. care for an individual other than a qualifying employee’s
• A serious health condition that makes the employee spouse, parent, or child.
unable to perform the functions of the employee’s Example. Your written policy provides 4 weeks of
position. annual paid leave to care for family members with a
• Any qualifying exigency (as the Secretary of Labor will, serious health condition. The policy’s definition of “family
by regulation, determine) arising out of the fact that the members” includes the individuals specified in the FMLA
spouse, or a son, daughter, or parent of the employee is a (spouse, children, and parents), and also includes
member of the U.S. Armed Forces (including the National grandparents, grandchildren, and domestic partners. Your
Guard and Reserves) who is on covered active duty (or employee uses 1 week of annual paid leave to care for
has been notified of an impending call or order to covered their grandmother, and, at a later time, uses 1 week of
active duty). annual paid leave to care for their son. Your policy
• Caring for a service member with a serious injury or provides paid leave specifically designated for an FMLA
illness if the employee is the spouse, son, daughter, purpose. Although the paid leave taken by the employee
parent, or next of kin of the service member. to care for their grandmother isn’t family and medical
leave, the paid leave taken by the employee to care for
The FMLA purposes are the purposes for which an their son is family and medical leave for which you can
employee may take leave under the FMLA. These terms claim the credit assuming all other requirements for the
have the same meaning as defined in section 825.102 of credit are met.
the FMLA regulations, 29 CFR 825.102.
Leave provided by employer’s short-term disability
Leave specifically designated for FMLA purposes. program. Paid leave provided under an employer’s
Other than paid leave to care for additional individuals, short-term disability program, whether self-insured by an
paid leave made available to an employee is considered employer or provided through a short-term disability
family and medical leave only if the leave is specifically insurance policy, may be characterized as family and
designated for one or more FMLA purposes, may not be medical leave if it otherwise meets the requirements to be
used for any other reason, and is not paid by a state or family and medical leave.
local government or required by state or local law.
Example 1. Your written policy provides 6 weeks of Minimum Paid Leave Requirements
annual paid leave for the birth of an employee’s child, and For an employer to be eligible to claim the credit, the
to care for that child (an FMLA purpose). The leave may employer’s written policy must meet certain minimum
not be used for any other reason. No paid leave is requirements with respect to paid family and medical
provided by a state or local government or required by leave. These requirements are:
state or local law. Your policy provides 6 weeks of family • The policy must provide at least 2 weeks of annual paid
and medical leave. family and medical leave to all qualifying employees who
Example 2. Your written policy provides 3 weeks of aren’t part-time employees, and at least a proportionate
annual paid leave that is specifically designated for any amount of paid family and medical leave to qualifying
FMLA purpose and may not be used for any other reason. employees who are part-time employees;
No paid leave is provided by a state or local government • The policy must require a rate of payment that isn’t less
or required by state or local law. Your policy provides 3 than 50% of the wages normally paid to the qualifying
weeks of family and medical leave. employee for services performed for the employer; and
Example 3. Your written policy provides 3 weeks of • If the employer employs one or more qualifying
annual paid leave for any of the following reasons: FMLA employees who aren’t covered by title I of the FMLA, the
purposes, minor illness, vacation, or specified personal employer’s written policy must also include the “non-
reasons. No paid leave is provided by a state or local interference” language discussed earlier.
government or required by state or local law. Your policy Any leave that is paid by a state or local government or
doesn’t provide family and medical leave because the required by state or local law isn’t taken into account for
leave isn’t specifically designated for one or more FMLA any purpose in determining the amount of paid family and
purposes and can be used for reasons other than FMLA medical leave provided by the employer.
purposes. This is true even if an employee uses the leave
for an FMLA purpose. Minimum Period of Leave Requirement
Leave to care for additional individuals. An An employer’s written policy must provide qualifying
employer’s written policy may provide paid leave that employees who aren’t part-time employees with at least 2
otherwise would be specifically designated for an FMLA weeks of annual paid family and medical leave and must
purpose (for example, to care for a spouse, child, or provide at least a proportionate amount of annual paid
parent who has a serious medical condition), except for family and medical leave to qualifying employees who are
the fact that the leave is available to care for additional part-time employees. For part-time employees, the paid
individuals not specified in the FMLA (for example, a leave ratio must be at least equal to the ratio of the
grandchild or grandparent who has a serious medical expected weekly hours worked by a qualifying employee
condition). In this limited circumstance, the fact that the who is a part-time employee to the expected weekly hours
leave could also be used to care for additional individuals worked by an equivalent qualifying employee who isn’t a
for whom care under the FMLA purpose isn’t required part-time employee. In determining the amount of paid
doesn’t prevent the leave from being considered family and medical leave provided by the employer, any

Instructions for Form 8994 (December 2024) 3

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leave paid by a state or local government or required by minimum paid leave requirements, including providing a
state or local law isn’t taken into account. rate of payment of at least 50% of wages normally paid to
Example. Your written policy provides 4 weeks of an employee.
annual paid family and medical leave to a qualifying Example 1. Under state law, an employee on family
employee expected to work 40 hours per week, and 2 and medical leave is eligible to receive 6 weeks of benefits
weeks of paid family and medical leave to an equivalent paid by a state insurance fund at a rate of 50% of the
qualifying employee who is a part-time employee and is employee’s normal wages. Additionally, your written policy
expected to work 20 hours per week. All of your concurrently provides each qualifying employee with 6
employees work either 20 or 40 hours per week. Your weeks of annual paid family and medical leave at a rate of
policy meets the minimum paid leave requirements payment of 30% of the wages normally paid to the
because each employee who isn’t a part-time employee employee for services performed for the employer.
may take at least the minimum 2 weeks of annual paid Consequently, in the aggregate, a qualifying employee
leave and each part-time employee may take at least a can receive 6 weeks of annual paid family and medical
proportionate number of weeks of leave. Specifically, with leave at a rate of payment of 80% of the wages normally
respect to the proportionate amount, the ratio of expected paid to the employee. Your policy doesn’t independently
weekly hours worked by a qualifying employee who is a satisfy the requirement that the rate of payment be at least
part-time employee (20 hours) to the expected weekly 50% of the wages normally paid to an employee.
hours worked by an equivalent qualifying employee who Example 2. The facts are the same as in Example 1,
isn’t a part-time employee (40 hours) is 1:2, and the policy except that your written policy provides each qualifying
provides 2 weeks of paid leave to qualifying employees employee with 6 weeks of annual paid family and medical
who are part-time employees and 4 weeks of paid leave to leave at a rate of payment of 50% of the wages normally
equivalent qualifying employees who aren’t part-time paid to the employee that runs concurrently with the state
employees, satisfying the 1:2 ratio. leave. Consequently, in the aggregate, a qualifying
Part-time employees. A part-time employee is an employee can receive 6 weeks of annual paid family and
employee who is customarily employed for fewer than 30 medical leave at a rate of payment of 100% of the wages
hours per week. Until further guidance is issued, an normally paid to the employee. Your policy independently
employer may use any reasonable method to determine satisfies the requirement that the rate of payment be at
how many hours an employee customarily works per week least 50% of the wages normally paid to an employee.
for the employer. Reasonable methods include the Only wages paid under your written policy (50% of wages
methods set forth in 29 CFR section 2530.200b-2 for normally paid to the employee) can be used to figure the
calculating hours of service in connection with certain credit. Wages paid pursuant to state law aren’t used to
plans, such as qualified pension plans, subject to the figure the credit.
Employee Retirement Income Security Act of 1974, as Example 3. Under state law, employers are required to
amended. provide employees 6 weeks of family and medical leave,
and the state law permits this leave to be either paid or
Minimum Rate of Payment Requirement unpaid. Your written policy provides each qualifying
The employer’s written policy must provide that each employee with 6 weeks of annual paid family and medical
qualifying employee who is on paid family and medical leave at a rate of payment of 50% of the wages normally
leave will be paid at least 50% of the wages normally paid paid to the employee. Your policy independently satisfies
to the employee for services performed for the employer. the requirement that the rate of payment be at least 50%
In determining the rate of payment under the policy, leave of the wages normally paid to an employee.
paid by a state or local government or required under state
Rate of Payment or Period Not Required To Be
or local law isn’t taken into account.
Uniform
Wages normally paid to an employee. Wages normally An employer’s rate of payment or period of paid family and
paid to an employee means the wages normally paid to
medical leave isn’t required to be uniform with respect to
the employee for services performed for the employer.
all qualifying employees and for all FMLA purposes.
Overtime (other than regularly scheduled overtime) and
However, to the extent an employer’s policy provides
discretionary bonuses are excluded from wages normally
different rates of payment or periods of paid family and
paid. Until further guidance is issued, for employees who
medical leave for different FMLA purposes, the minimum
are paid (in whole or in part) on a basis other than a
paid leave requirements must be satisfied with respect to
salaried or hourly rate, an employer must determine
each FMLA purpose for which the employer intends to
wages normally paid to the employee using the rules for
claim the credit. Conversely, if an employer’s policy
determining regular rate of pay set forth in regulations
provides a uniform rate of payment and period of paid
issued under the FLSA. See 29 CFR section 778.109.
family and medical leave for all qualifying employees and
Leave paid by a state or local government or re- for all FMLA purposes (or a uniform rate of payment and
quired by state or local law. Leave paid by a state or period for several specified FMLA purposes), the policy as
local government or required by state or local law isn’t a whole must satisfy the minimum paid leave
taken into account in determining whether an employer’s requirements, and it isn’t necessary for the minimum paid
written policy provides a rate of payment of at least 50% of leave requirements to be satisfied separately with respect
the wages normally paid to an employee for services to each FMLA purpose.
performed for the employer. To be eligible to claim the Example 1. Your written policy provides each qualifying
credit, an employer must independently satisfy the employee with 6 weeks of annual paid leave for the birth

4 Instructions for Form 8994 (December 2024)

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or adoption of the employee’s child, or to care for that child (which is 50 percentage points greater than 50%), the
(an FMLA purpose) at a rate of payment of 100% of base applicable percentage for these employees is
wages normally paid to the employee for services increased by 12.5% (0.25% × 50), for an applicable
performed for you. For all other FMLA purposes, the policy percentage of 25% (12.5% + 12.5%). For a qualifying
provides each qualifying employee with 2 weeks of annual employee who has less than 10 years of service, the
paid leave at a rate of payment of 75% of wages normally applicable percentage is the same as determined in
paid to the employee. Your written policy satisfies the Example 1.
minimum paid leave requirements.
Example 2. Your written policy provides each qualifying How To Figure the Credit
employee with 2 weeks of annual paid leave for the birth In the case of an eligible employer, the credit is an amount
or adoption of the employee’s child, or to care for that child equal to the applicable percentage of the amount of
(an FMLA purpose) at a rate of payment of 100% of wages paid to qualifying employees during any period in
wages normally paid to the employee, and also provides which such employees are on family and medical leave.
each qualifying employee who isn’t covered by a collective The term “applicable percentage” means 12.5% increased
bargaining agreement with 2 weeks of annual paid leave (but not above 25%) by 0.25 percentage points for each
for a serious health condition that makes the employee percentage point by which the rate of payment exceeds
unable to perform the duties of their position (also an 50%. See Applicable Percentage, earlier.
FMLA purpose) at a rate of payment of 100% of wages
normally paid to the employee. The portion of your policy The amount of family and medical leave that may be
that provides paid leave to each qualifying employee for taken into account with respect to any qualifying employee
the birth or adoption of the employee’s child, or to care for for any tax year may not exceed 12 weeks. The credit with
that child, satisfies the minimum paid leave requirements. respect to any qualifying employee for any tax year can’t
However, the portion of the policy providing only certain exceed an amount equal to the product of the employee’s
qualifying employees (those who aren’t covered by a normal hourly wage rate for each hour (or fraction thereof)
collective bargaining agreement) with paid leave for a of actual services performed for the employer and the
serious health condition that makes the employee unable number of hours (or fraction thereof) for which family and
to perform the duties of their position doesn’t satisfy the medical leave is taken.
minimum paid leave requirements, and you can’t claim the Figuring the credit. The credit is equal to the applicable
credit for any leave taken under that portion of the policy. percentage of the amount of wages paid to a qualifying
Example 3. Your written policy provides each qualifying employee during any period (up to 12 weeks) that the
employee with 2 weeks of annual paid leave for any FMLA employee is on family and medical leave.
purpose at a rate of payment of 100% of the wages Example 1. Your written policy provides each qualifying
normally paid to the employee, and each qualifying employee with 4 weeks of annual paid family and medical
employee who has 10 years of service with an additional 2 leave at a rate of payment of 75% of wages normally paid
weeks of annual paid leave for any FMLA purpose at a to the employee. During 2024, your employee takes 4
rate of payment of 100% of wages normally paid to the weeks of leave under the policy. The employee is normally
employee. Your policy satisfies the minimum paid leave paid $1,000 per week. You pay the employee a total of
requirements. $3,000 ($750 per week for 4 weeks) for family and medical
leave. Assuming all other requirements for the credit are
Applicable Percentage met, you can claim a credit of $562.50 with respect to the
The applicable percentage is based on the rate of employee (18.75% of $3,000).
payment for the leave under the employer’s policy. The Example 2. The facts are the same as in Example 1,
base applicable percentage of 12.5% applies if the rate of except that your written policy provides each qualifying
payment is 50%. If the rate of payment under the policy is employee who has at least 10 years of service with a rate
greater than 50%, the applicable percentage is increased of payment of 100% of the wages normally paid to the
by 0.25 percentage points for each percentage point by employee. During 2024, Employee A, who has been
which the rate of payment exceeds 50%, up to a maximum employed for 12 years, takes leave under the policy for 4
applicable percentage of 25%. weeks, and Employee B, who has been employed for 5
Example 1. Your written policy provides each qualifying years, takes leave under the policy for 2 weeks. Both
employee with 4 weeks of annual paid family and medical Employee A and Employee B are normally paid $1,000
leave at a rate of payment of 75% of the wages normally per week. You pay Employee A a total of $4,000 and
paid to the employee. Because the rate of payment under Employee B a total of $1,500 for family and medical leave.
the policy exceeds 50% by 25 percentage points, the base Assuming all other requirements for the credit are met,
applicable percentage of 12.5% is increased by 6.25% you can claim a total credit of $1,281.25 with respect to
(0.25% × 25), for an applicable percentage of 18.75% Employee A and Employee B. The credit for Employee A
(12.5% + 6.25%). is $1,000 (25% of $4,000), and the credit for Employee B
Example 2. The facts are the same as in Example 1, is $281.25 (18.75% of $1,500).
except that your written policy provides each qualifying
Wages defined. The term “wages” has the same
employee who has at least 10 years of service a rate of
meaning given to that term by section 3306(b) (regarding
payment of 100% of the wages normally paid to the
FUTA wages), determined without regard to the $7,000
employee for services performed by the employee, rather
FUTA wage limitation. Section 3306(b) generally defines
than 75%. Because the rate of payment for a qualifying
wages as all remuneration for employment, as defined by
employee who has at least 10 years of service is 100%
section 3306(c), subject to certain limitations. However,

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for this purpose, the term “wages” doesn’t include any is taken. Wages paid to an employee for family and
amount taken into account for purposes of determining medical leave before an employee becomes a qualifying
any other general business credit. employee are excluded in determining the employer’s
For more information about general business credits, credit. However, if an employer’s written policy provides
see the Instructions for Form 3800. that employees may take paid family and medical leave
Example 1. You pay wages to your employee that before they become qualifying employees and doesn’t
qualify as a research expense for purposes of determining provide a dedicated amount of leave meeting the
the amount of your research credit under section 41(a). minimum paid leave requirements that may only be taken
The research credit under section 41(a) is a general after an employee becomes a qualifying employee, the
business credit allowed under section 38. Some of the leave will not fail to (a) be specifically designated for an
wages paid to your employee for the performance of FMLA purpose, or (b) meet the minimum paid leave
qualified services under section 41(b) were paid while the requirements, solely because an employee may take paid
employee was on family and medical leave. To figure your leave before becoming a qualifying employee.
credit, you must exclude from the wages paid while your Example. Your written policy provides all employees
employee was on family and medical leave any wages who have completed at least 6 months of employment
treated as a qualified research expense for purposes of with 4 weeks of annual paid family and medical leave at a
determining the amount of your research credit under rate of payment of 100% of wages normally paid to the
section 41(a). employee for services performed by the employee. Your
Example 2. The employer is tax-exempt under section employee completes 6 months of employment with you as
501(a) as an educational organization described in of January 1, 2024, and 1 year of employment (becoming
section 501(c)(3). Because employment with the a qualifying employee) as of July 1, 2024. On June 15,
employer isn’t employment for purposes of FUTA tax, 2024, your employee begins a 4-week period of paid
wages paid by the employer aren’t FUTA wages. Although family and medical leave under the policy. Assuming all
the employer is exempt from federal income tax, it earns other requirements for the credit are met, you can use
unrelated business taxable income from a trade or wages paid to the employee for family and medical leave
business that isn’t substantially related to the performance on or after July 1, 2024, the date that employee becomes
of the employer’s exempt purpose. The employer a qualifying employee, to figure the credit. Wages paid for
maintains a written paid leave policy that provides at least family and medical leave taken before the employee
2 weeks of paid family and medical leave to all qualifying becomes a qualifying employee aren’t eligible for the
employees, including those performing services for the credit.
unrelated trade or business. The employer would like to Eligible employer for whom qualifying employees
claim the credit against its unrelated business income tax perform services. Only an eligible employer for whom
liability. Because the employer doesn’t pay FUTA wages, qualifying employees perform services can claim the
wages paid by the employer aren’t wages for purposes of credit with respect to wages paid.
the credit. Consequently, amounts paid by the employer to
Normal hourly wage rate of an employee not paid an
its employees while on paid family and medical leave
hourly wage rate. Until further guidance is issued, an
aren’t eligible for the credit.
employer may use any reasonable method to convert the
Wages paid by third-party payer. Wages paid by a normal wages paid to an employee who isn’t paid an
third-party payer (including an insurance company, a hourly wage rate to an hourly rate.
professional employer organization, or a Certified
Professional Employer Organization) to qualifying Aggregation Rules
employees for services performed for an eligible employer Section 45S(c)(3) provides that all persons who are
are considered wages for purposes of the credit. However, treated as a single employer under section 52(a) and (b)
only the eligible employer, and not the third-party payer, are treated as a single taxpayer. In accordance with this
can take these wages into account when figuring the aggregation rule, employers are aggregated for purposes
credit. of section 45S(h)(1), which provides that a taxpayer may
Leave paid by a state or local government or re- elect to have section 45S not apply for any tax year.
quired by a state or local law. Leave paid by a state or Consequently, employers aren’t aggregated for any other
local government or required by a state or local law isn’t purpose, including figuring the credit.

taken into account when figuring the credit. Members of Controlled Groups or
Wages paid through a short-term disability program.
Businesses Under Common Control
Wages paid through an employer’s short-term disability
program for family and medical leave are taken into Each member of a controlled group of corporations and
account in figuring the credit provided that the program (in each member of a group of businesses under common
combination with any other employer-paid leave control generally makes a separate election to claim or not
arrangement) meets the minimum paid leave to claim the credit in accordance with rules set forth under
requirements. section 51(j)(2) and (3). However, in the case of a
consolidated group (as defined in Regulations section
Employee becomes a qualifying employee after leave 1.1502-1(h)), the election is made by the agent (as
is taken. An eligible employer may claim the credit only defined in Regulations section 1.1502-77) of the group. An
with respect to wages paid to an employee who is a election to claim or not to claim the credit is made for the
qualifying employee at the time family and medical leave tax year in which the credit is available by claiming or not

6 Instructions for Form 8994 (December 2024)

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claiming the credit on either an original return or an Line 2
amended return filed for that tax year.
Enter total paid family and medical leave credits from:
More Information • Schedule K-1 (Form 1065), Partner’s Share of Income,
For more information about this credit, see the following. Deductions, Credits, etc., box 15 (code BB); or
• Schedule K-1 (Form 1120-S), Shareholder’s Share of
• Section 45S. Income, Deductions, Credits, etc., box 13 (code BB).
• Notice 2018-71, 2018-41 I.R.B. 548, available at Partnerships and S corporations report the above
IRS.gov/irb/2018-41_IRB#NOT-2018-71. 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
Specific Instructions
above credits directly on Form 3800, Part III, line 4j.
Line A
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

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Paid Family and Medical Leave Credit Worksheet                                                                                    Keep for Your Records
    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)                                  (b)               (c)                                                                  (d)
     Qualifying Paid Family and                    Applicable Percentage                                                          Credit Amount
     Employee   Medical Leave                      (shown as a decimal (25% = 0.25))                                               (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)

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Instructions for Paid Family and which the rate of payment exceeds 50%, up to a maximum
applicable percentage of 25%. See Applicable
Medical Leave Credit Worksheet Percentage, earlier, for examples. You can use the
following Applicable Percentage Worksheet to figure the
Although you only need to provide summary
applicable percentage(s) to enter in column (c).
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 Applicable Percentage Worksheet
Family and Medical Leave Credit Worksheet is one
method of reflecting the necessary information and is 1. Enter the percentage required
provided to assist you in this process. You should retain under your written policy for the
this worksheet (or any other document you use for payment of family and medical
capturing this information) in your records. The information leave* . . . . . . . . . . . . . . . . 1. %
needed to support the amount of credit you are claiming 2. Minimum percentage required
includes the: to claim the credit . . . . . . . . 2. 50 %
• Name and social security number of each qualifying 3. Subtract line 2 from line 1. If the
employee, result is less than zero, stop
• Wages paid to each qualifying employee, here, skip lines 4 and 5, and
• Name and employer identification number of each enter -0- on line 6 . . . . . . . . 3. %
qualifying employer, 4. Multiply the number (percentage
• Applicable percentage, and points) on line 3 by 0.25
• Family and medical leave policy. percentage points. For example,
if line 3 is 25%, then 25 × 0.25 =
Column (a), Qualifying Employees 6.25 percentage points or
6.25% . . . . . . . . . . . . . . . . 4. %
Enter the name or other identifying information for each
qualifying employee to whom wages were paid while on 5. Base applicable
family and medical leave. See Qualifying Employee and percentage . . . . . . . . . . . . . 5. 12.5 %
Family and Medical Leave, earlier. 6. Add lines 4 and 5. Enter this
applicable percentage shown as
Column (b), Paid Family and Medical Leave a decimal (for example, 18.75%
Enter the total family and medical leave wages paid during would be shown as 0.1875) in
the tax year for each employee listed in column (a). See column (c) of the Paid Family
Family and Medical Leave and Minimum Rate of Payment and Medical Leave Credit
Requirement, earlier. Worksheet for all qualified
employees to whom the rate of
Column (c), Applicable Percentage payment shown on line 1
The applicable percentage is based on the rate of applies. . . . . . . . . . . . . . . . 6. %
payment for the leave under the employer’s policy. The
base applicable percentage of 12.5% applies if the rate of * Complete a separate worksheet for each separate
payment is 50%. If the rate of payment under the policy is percentage required and used under your written policy for
greater than 50%, the applicable percentage is increased the payment of family and medical leave.
by 0.25 percentage points for each percentage point by

Instructions for Form 8994 (December 2024) 9

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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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 hr., 54 min.
Preparing and sending the form to the IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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)

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