Global Daily Tax News, IRS Guides On Expanded Credit For Paid Family And Medical Leave, (Aug 7, 2026)

The US Treasury Department and the Internal Revenue Service have issued Notice 2026-28, providing guidance on the employer credit for paid family and medical leave (PFML) under the Working Families Tax Cut Act (WFTC).

The Working Families Tax Cut Act permanently expanded the employer tax credit for paid family and medical leave, providing businesses with greater incentives to offer up to 12 weeks of paid leave. Employees may use the leave to recover from a serious health condition or to care for certain family members with serious health conditions.

The IRS noted the WFTC also makes several key improvements to the credit, including:

• Expanded Eligibility: Employers can claim the credit for employees with six months of service and for part-time employees customarily working 20 hours or more per week;

• Expanded Coverage: Employers can claim the credit for insurance premiums to provide leave, or wages paid during leave;

• State and Local Mandates: Employers can count leave provided under state or local mandates toward the eligibility for this federal tax credit, but not toward the credit calculation.

Beginning in 2026, employers can claim the credit for premiums paid for PFML insurance policies, in addition to wages paid during PFML leave.

To help employers apply the new premium-based method, Notice 2026-28 addresses how the premium-based method compares to the wage-based method, how to allocate the qualifying premiums, and how to elect between the premium method and the wage method. Forthcoming proposed regulations will provide broader guidance to address the statute comprehensively and provide certainty to taxpayers, the IRS said.