Starting in 2026, the IRS is making the Employer Credit for Paid Family and Medical Leave permanent, and expanding how you can claim it.

Right now (through 2025), businesses can get a 12.5%–25% federal tax credit on wages paid to qualifying employees who take family or medical leave, but that was supposed to expire next year.

The new law changes that:

Makes the credit permanent (no more annual renewals)

Lets you claim it two ways:

Based on wages paid during leave, or

For a portion of paid family leave insurance premiums you cover

Why Contractors Should Care

If you have crew members who need time off for a new child, medical recovery, or family emergencies, you can:

Keep good people on your team,

Offer real benefits that help with retention, and

Get a tax credit for it.

That’s a win for your workforce and your bottom line.

TLDR:

Say one of your operators takes six weeks off for medical recovery. If you pay them during leave, you can claim up to a 25% tax credit on those wages.That’s like getting reimbursed by the IRS for taking care of your own team.