If you offer employees paid time off for a new baby, a serious illness, or caring for a family member, a long-standing tax credit just became more valuable and more accessible than ever. On August 5, 2026, the Treasury Department and IRS released Notice 2026-28, putting guidance behind the Working Families Tax Cuts’ permanent version of the Section 45S paid family and medical leave (PFML) credit.
Until now, this credit lived on borrowed time, a temporary provision that Congress kept extending a year or two at a stretch, which made it hard for businesses to plan around. That uncertainty is gone. The credit is permanent, the eligibility rules just got broader, and employers now have a second way to calculate it that could make it easier to claim.
At MBE CPAs, we help business owners figure out which credits are worth the paperwork and which ones aren’t, the same question we help clients work through with credits like the Work Opportunity Tax Credit. This is one worth a closer look, so here’s what changed and how we can help you use it.
What Is the Paid Family and Medical Leave Tax Credit?
The Section 45S credit rewards employers who voluntarily offer paid family and medical leave to their employees. It’s a general business tax credit, meaning it reduces your tax bill dollar for dollar rather than just lowering taxable income, and it applies on top of the wages or premiums you’re already paying.
What Changed with the Paid Leave Tax Credit in 2026?
A few things are different now.
- It’s permanent. The credit no longer has a sunset date to track or a renewal to wait on.
- The credit rate stays the same. It’s 12.5% to 25% of qualifying wages, scaled to how much of an employee’s normal pay the leave benefit replaces, for up to 12 weeks of leave per employee per year.
- More employees qualify. Employers can now claim the credit for employees with as little as six months of service, down from a full year, and for part-time employees working at least 20 hours a week. That’s a meaningful expansion for businesses that lean on part-time staff.
- There’s a new way to calculate it. Previously, the credit was tied strictly to wages paid while an employee was out on leave. Notice 2026-28 introduces a premium-based method: employers who pay into a PFML insurance policy can claim the credit based on those premiums instead, whether or not any employee takes leave that year.
Employers choose one method or the other. The notice explains how the two compare and how to allocate qualifying premiums if you go the insurance route. This is exactly the kind of election where working through the math with a tax professional pays off, since the right choice depends on your specific workforce and claims history.
Does the Paid Leave Tax Credit Apply to My Business?
This is worth a second look if you:
- Already offer a paid leave benefit and have been claiming, or meant to claim, the 45S credit under the old wage-based rules.
- Have a meaningful part-time workforce, since the lowered service and hours threshold may bring employees into eligibility who weren’t covered before. This arises often for healthcare services clients with larger part-time or per-diem staffs.
- Are weighing whether to add a paid leave benefit at all, especially alongside other benefit decisions like the HSA changes taking effect under the Working Families Tax Cuts, and want to know what it might cost after the credit.
- Currently self-insure your paid leave benefit and haven’t compared that to buying a PFML insurance policy now that premiums themselves can generate a credit.
If any of these sound like your business, it’s worth a conversation before you finalize your 2026 approach.
What Should Employers Do Before Year-End?
- Pull your current paid leave policy and check it against the updated eligibility rules. You may have employees who now qualify who didn’t before.
- Model both calculation methods. If you’re insured or considering insurance for PFML, compare the premium-based credit to what you’d claim under the wage-based method to see which comes out ahead for your workforce.
- Confirm your written plan and payroll documentation support whichever method you choose. This isn’t an automatic credit, so the paperwork matters.
- If you don’t currently offer paid leave, ask whether the after-credit cost of adding a policy has changed enough to make it worth reconsidering, especially with the eligibility expansion to part-time staff.
None of this is a hard deadline. There’s no filing cliff tied to Notice 2026-28. But the calculation method you select applies for the year, so it’s worth deciding deliberately rather than defaulting to whatever you did last year.
How Can MBE CPAs Help with the Paid Leave Tax Credit?
Figuring out which method saves your business more, and whether your documentation would hold up if the credit were ever reviewed, isn’t always straightforward. Our team can model both the wage-based and premium-based calculations against your payroll and leave data, review your written plans for gaps, and help you decide, through our business consulting and advisory services, whether adding or adjusting a paid leave benefit makes sense for your workforce. Whether you’re already claiming this credit or just found out it exists, we can help you make sure you’re getting the full benefit of it, correctly, before year-end.
Who Can Help with the HR Side of Offering Paid Leave?
Claiming the credit is a tax question, but building or updating the leave policy itself is an HR question, and that’s not always something an internal team has bandwidth for. Our affiliate, Workforce Solutions, offers boutique, hands-on HR consulting for businesses that don’t have a full internal HR department to lean on. They can help draft or update your written PFML plan document, put together the employee notices and eligibility tracking that keep the credit’s paperwork requirements in order, and think through how a paid leave benefit fits alongside your other policies. Pairing their HR consulting with our tax planning means the policy and the credit calculation are built to match from the start.