Issue Number: Tax Tip 2026-64
What employers need to know about the enhancements to the Paid Family and Medical Leave Tax Credit
Employers, including small businesses, that provide paid family and medical leave to their employees may be eligible for an employer tax credit. Several enhancements have been made to this credit under the Working Families Tax Cuts.
Here’s an overview of the employer credit for Paid Family and Medical Leave, including the recent changes.
What is the employer credit for PFML?
Employers who meet the requirements can claim a general business tax credit from 12.5% to 25% of wages paid to qualifying employees for up to 12 weeks of family and medical leave per taxable year.
Employers can offer up to 12 weeks of paid family and medical leave to employees for the following reasons:
- Having a baby, adopting or fostering a child
- Taking care of their own serious health condition or for their spouse, child, or parent
- Dealing with a situation of a close relative who is a member of the Armed Forces and on covered active duty
- Taking care of a close relative who is seriously ill or an injured covered servicemember
Key enhancements:
- The credit is now permanent.
- Expanded eligibility: Employers can claim the credit for employees with six months of service and for part-time employees working 20 hours or more per week.
- Expanded coverage: Employers can claim the credit for insurance premiums paid to provide leave, or wages paid during leave.
- State and local mandates: Employers can count leave provided under state or local mandates toward the eligibility for this federal tax credit, but not toward the credit calculation.
Ways to claim the credit
Employers can claim the credit using one of these methods:
- New premium-based: Based on qualifying premiums the employer paid for PFML insurance policies
- Wage-based: Based on the wages paid while the employee is on PFML
Learn more about each method in Notice 2026-28. It compares the two methods, addresses how to allocate the qualifying premiums, and how to elect between the premium method and the wage method.
More information
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