The U.S. Department of the Treasury and the Internal Revenue Service (IRS) have issued Notice 2026-28, providing crucial guidance on the employer credit for paid family and medical leave (PFML) under the Working Families Tax Cuts (WFTC). This legislation permanently expands and enhances eligibility and coverage for businesses offering PFML benefits to their employees.
Treasury Secretary Scott Bessent emphasized the importance of the initiative, saying, “Hardworking Americans should not have to choose between caring for a loved one and earning a paycheck.” He added that the WFTC "permanently expands the federal Paid Family and Medical Leave Tax Credit, giving businesses, especially small businesses, greater incentives to provide paid leave so workers can care for a newborn or other family member or recover from a serious illness without sacrificing their financial security." IRS Chief Executive Officer Frank J. Bisignano also noted that the expansion "encourages businesses to provide paid family and medical leave" and will make more employers eligible.
The WFTC introduces several key improvements, including expanded eligibility for employees with six months of service and part-time employees working 20 hours or more per week. Coverage is also expanded, allowing employers to claim the credit for insurance premiums to provide leave, or for wages paid during leave. Additionally, leave provided under state or local mandates can now count toward eligibility for this federal tax credit.
Beginning in 2026, employers can claim the credit for premiums paid for PFML insurance policies, alongside wages. The credit ranges from 12.5% to 25% of wages paid to qualifying employees for up to 12 weeks of leave annually. Treasury and the IRS plan to issue proposed regulations for comprehensive guidance, inviting public comments on all aspects of the notice.