The Internal Revenue Service issued guidance for the employer tax credit for paid family and medical leave, which was permanently expanded under the One Big Beautiful Bill Act’s Working Families Tax Cuts provisions, on Aug. 5.
Notice 2026-28 clarifies how employers calculate and claim the credit, which had previously been a temporary provision subject to annual congressional renewal, the IRS said. The guidance is effective immediately for tax year 2026.
The permanent expansion is expected to encourage more employers — particularly small and mid-sized businesses — to offer paid family leave benefits to their workers. The credit allows employers to deduct a percentage of wages paid to employees on qualified family or medical leave.
The United States is one of the few developed nations without a universal federal paid family leave mandate. The tax credit approach incentivizes voluntary employer adoption rather than requiring all employers to provide leave benefits.
The guidance is a priority for human resources professionals, payroll administrators and small business owners who need to understand the new rules before filing 2026 tax returns. Employers that already offer paid leave may be able to claim credits retroactively for qualifying wages paid during the tax year.
Making the credit permanent removes the uncertainty that accompanied annual expirations, giving businesses more confidence to establish or expand paid leave programs, according to business groups that had lobbied for the change.