A permanent general business tax credit for employers who voluntarily provide paid family and medical leave at or above a 50% wage-replacement rate.
How it works
The credit rate starts at 12.5% at 50% wage replacement and increases 0.25 percentage points for each additional point of wage replacement, capping at 25% when wages are fully replaced. That rate applies to wages paid during qualifying leave.
What this does not include
This computes the credit using the statutory wage method — a newer alternative “premium method” (introduced under recent IRS guidance) computes the credit differently for employers who purchase a paid leave insurance policy rather than self-funding leave directly.
How to use this calculator
- Enter wages paid during qualifying leave and the wage replacement rate.
Frequently asked questions
Is paid family leave mandatory for employers to offer?
No — federally, this remains a voluntary employer benefit (though some states separately mandate paid leave); the §45S credit specifically incentivizes voluntary employer-provided leave.
Why does the credit rate increase with wage replacement?
To reward employers who provide more generous benefits — a higher wage-replacement percentage during leave earns a proportionally higher credit rate, up to the 25% cap.
What changed under the One Big Beautiful Bill Act?
The Act made the §45S credit permanent, removing its prior scheduled expiration and providing employers long-term certainty when designing paid leave policies.
