An income tax credit is available to an employer of an employee in the National Guard or a reserve component of the U.S. armed forces who is mobilized for federal active duty under Title 10 of the U.S. Code.
Reduction in compensation is defined as the excess of the amount of compensation the employer would have paid had there been no mobilization over the total military compensation paid because of the mobilization. In determining the amount of compensation the employer would have paid, the amount may include the employer’s portion of any voluntary or matching contributions paid, or that would have been paid, into a defined contribution plan.
Qualifications
Employer of an employee in the National Guard or a reserve component of the U.S. armed forces who is mobilized for federal active duty under Title 10 of the U.S. Code.
A taxpayer that holds an interest in a passthrough entity that qualifies for this credit may claim its share of the tax credit in proportion to its interest in the entity. The credit must be claimed in the same taxable year in which the taxable year of the passthrough entity ends.
Credit Amounts
In determining the reduction in compensation, the civilian and military compensation must be compared for the same time period. If the military compensation is equal to or more than the civilian compensation, the reduction in compensation is zero and no credit is allowed.
The credit is equal to 25% of the lesser of:
- the amount of compensation the employer continues to pay during the period of mobilization; or
- the reduction in compensation.
The maximum credit allowed per eligible employee is $1,000, and the credit may not exceed the taxpayer’s income tax liability. Any unused credit may be carried forward for five taxable years.
Application Process
Not Applicable.
How to Claim
If you're filing as a/an: | Claim the credit on: |
| Individual or Sole Proprietor | Schedule ME, Credit for Wages Paid to Mobilized Employee |
| C Corporation | Form 40, Corporation Income Tax Return Schedule ME |
| S Corporation | Form 60, S Corporation Income Tax Return Schedule ME |
| Partnership | Form 58, Partnership Income Tax Return Schedule ME |
| Fiduciary | Form 38, Fiduciary Income Tax Return Schedule ME |