What is the Paid family and medical leave credit?
The paid family and medical leave credit is a permanent federal tax credit that allows employers to claim between 12.5% and 25% of qualifying wages or insurance premiums paid for employee family and medical leave programs. Made permanent under the One Big Beautiful Bill Act starting in 2026, the credit applies to employees working at least 20 hours per week who become eligible after six months of service. Credit percentages increase proportionally with wage replacement rates, from a base of 12.5% at 50% wage replacement to a maximum of 25% at 100% replacement. Qualifying leave includes care for newborns, family members with severe health conditions, military family situations, and employees' own medical needs. Employers in states with mandatory leave programs can claim credits only for benefits exceeding state requirements. The credit coordinates strategically with Employee achievement awards and Health reimbursement arrangement benefits to create comprehensive employee support programs.
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