IRS clarifies rules for expanded paid leave tax credit

The IRS recently issued Notice 2026-28, which provides guidance on how employers can use the new premium-based method to calculate the expanded credit for paid family and medical leave (PFML) under the 2025 tax law.

H.R. 1, commonly referred to as the One Big Beautiful Bill Act, made the PFML credit in Sec. 45S permanent and made substantive changes to enhance the credit and expand its availability to a broader group of employers.

However, employers must ensure that their written leave policies are compliant during the first full year that the amended Sec. 45S changes are in effect as of 2026.

H.R. 1 offers greater incentives for businesses to offer up to 12 weeks of paid leave, which employees may use to recover from a serious health condition or to care for certain family members with serious health conditions, the IRS said. Learn more.