Section 45S Employer Credit for Paid Family and Medical Leave

Federal tax credit for employers who provide paid family and medical leave to employees, including leave to care for a seriously ill family member. Made permanent and expanded by OBBBA (P.L. 119-21). Credit is 12.5-25% of wages paid during qualifying leave. Directly drives availability of employer-paid caregiving leave in the 40+ states with no state PFML program — the primary federal mechanism incentivizing employers to offer paid leave for family caregiving.

Credit for employers who pay employees during qualifying FMLA-type leave, including leave to care for a seriously ill family member: (1) Credit rate: 12.5% of wages paid if wages = 50% of normal pay; increases 0.25 percentage points for each 1% above 50%, up to 25% credit if wages = 100% of normal pay; (2) Qualifying leave: must be FMLA-covered leave reasons, including caregiving for a seriously ill spouse, child, or parent; (3) OBBBA expansions (permanent from 2026): credit now applies to employees with as little as 6 months tenure (was 1 year); insurance premiums paid for voluntary short-term disability policies that also cover FMLA leave are now creditable; (4) Employer impact: this credit drives employer adoption of paid caregiving leave in the 40+ states without a state PFML program — employees whose employers have a qualifying plan can receive paid leave when they need to care for a family member, even without a state PFML program. For caregivers: ask your HR department whether your employer has a paid family leave policy that qualifies under IRC §45S. Form 8994 (for employers). Permanent credit — no expiration risk.

Some details for this program are still being verified. Check the official source for the most current information.

Eligibility

• Employer must have 1+ employees

Services

Credit for employers who pay employees during qualifying FMLA-type leave, including leave to care for a seriously ill family member: (1) Credit rate: 12.5% of wages paid if wages = 50% of normal pay; increases 0.25 percentage points for each 1% above 50%, up to 25% credit if wages = 100% of normal pay; (2) Qualifying leave: must be FMLA-covered leave reasons, including caregiving for a seriously ill spouse, child, or parent; (3) OBBBA expansions (permanent from 2026): credit now applies to employees with as little as 6 months tenure (was 1 year); insurance premiums paid for voluntary short-term disability policies that also cover FMLA leave are now creditable; (4) Employer impact: this credit drives employer adoption of paid caregiving leave in the 40+ states without a state PFML program — employees whose employers have a qualifying plan can receive paid leave when they need to care for a family member, even without a state PFML program. For caregivers: ask your HR department whether your employer has a paid family leave policy that qualifies under IRC §45S. Form 8994 (for employers). Permanent credit — no expiration risk.

How to apply

Apply online or find more information at the official program page.