The paid family and medical leave credit is permanent and wider

The credit is a general business credit of 12.5% to 25% of wages paid to qualifying employees on leave, for up to 12 weeks a year. Employees with six months of service now qualify, and part-time employees count if they customarily work 20 hours or more a week.

From 2026, employers can claim the credit for premiums paid on paid family and medical leave insurance policies instead of wages paid during leave. Notice 2026-28 explains how to allocate premiums and how to choose between the two methods.

Leave an employer provides because a state or local law requires it counts toward meeting the eligibility rules, but not toward the credit calculation. In states with their own paid leave programs, expect a smaller credit than the headline rate suggests.

Leave wages need to be identifiable by employee and by period, separate from regular wages and from state-mandated leave. If the client buys a leave insurance policy, record the premiums in their own expense account so the premium method can be documented.