Navigating Employer Paid Family and Medical Leave Credits

Employers that provide paid family and medical leave may now have access to a permanent federal tax credit worth up to 25% of qualifying wages.

The employer credit for paid family and medical leave is now permanent for tax years beginning after December 31, 2025, under the One Big Beautiful Bill (OBBB), and can still be claimed for open tax years. This creates a renewed planning opportunity for employers with qualifying leave policies.

Requirements of Paid Family and Medical Leave

Even with recent enhancements, eligibility for the paid family and medical leave credit remains complex.

To qualify, employers must have a written paid family and medical leave policy that meets several requirements, including:

• Paid Leave Requirements
  • At least two weeks of annual paid leave for full-time qualifying employees
  • Proportionate paid leave for part-time qualifying employees
  • Compensation of at least 50% of the employee’s normal wages
• Policy Language
  • Non-interference and job-protection provisions for employees not otherwise covered by FMLA
• Employee Eligibility
• Minimum length-of-service requirements
• Compensation limits that restrict which employees qualify
• Qualified Leave Purpose
• Leave must be taken for an FMLA-qualifying reason

Benefit of the Credit

The employer-paid family and medical leave credit is calculated as a percentage of qualified wages or eligible insurance premiums, ranging from 12.5% to 25%. While the credit is non-refundable, it can still provide meaningful tax savings for profitable employers or carried forward to a future year.

Next Steps for Organizations

Employers interested in claiming the paid family and medical leave credit should begin by reviewing their written policies to confirm they meet the updated requirements.

Notably, eligibility criteria differ for tax years prior to the OBBB enhancements, making a year-by-year analysis critical.

Our Business Credits & Incentives team can assess your organization’s eligibility and help you claim the FMLA tax credit. Simply complete the assessment below, and once we review your information, we will follow up with recommendations and next steps.