This bill increases and makes permanent the employer tax credit for paid family and medical leave, raising the minimum credit to 25% and the maximum to 50% for taxable years starting after December 31, 2025.
Ryan Mackenzie
Representative
PA-7
This bill amends the Internal Revenue Code to increase and make permanent the employer tax credit for paid family and medical leave. It raises the minimum credit to 25% and the maximum to 50%, adjusting the incremental increase in the credit. These changes will apply to taxable years beginning after December 31, 2025.
Tax Breaks Get Bigger for Companies Offering Paid Family & Medical Leave - Starting 2026
The proposed amendment to the Internal Revenue Code is all about giving employers a bigger tax break for offering paid family and medical leave. Instead of the old rules, this bill, effective after December 31, 2025, jacks up the tax credit employers can claim, making it a more enticing reason to offer this benefit.
Diving into the Details
This bill isn't just tweaking the numbers; it's making some serious changes. The minimum tax credit an employer can get for offering paid leave jumps from 12.5% to 25%. The maximum? It goes from 25% all the way up to 50%. Plus, for every percentage point an employer pays above the minimum, their tax credit increases by 0.50 percentage points instead of the previous 0.25. This means offering better leave terms can really pay off tax-wise. (SEC. 1)
Real-World Rollout
Imagine you run a small bakery or a tech startup. Offering paid leave can be tough financially, but this credit makes it easier. For instance, if you're paying an employee $1,000 a week on leave, you could now potentially get back $250 to $500 as a tax credit, depending on how generous your leave policy is. This could be a game-changer for businesses that want to support their employees but need to watch their bottom line. This also removes the previous expiration date for this credit, making this benefit permanently available.
Who Wins and How?
Obviously, employees of companies that offer (or will now offer) paid family and medical leave are big winners. More money in employers' pockets should translate to better benefits and more job security for workers. Think about it: if you need to take time off to care for a new baby or a sick family member, paid leave can be a lifeline. This bill makes it more likely your employer can afford to offer that. Companies that can now afford to extend benefits to their employees will also likely see a boost in morale and productivity.
Potential Snags
While the increased tax credit is a solid move, there are potential hitches. A business could, in theory, lower wages or trim other benefits to offset the cost, even with the tax credit. It's also possible some might design leave policies that look good on paper but don't actually give employees much time off, just to maximize the tax benefit. These are edge cases, but they're worth watching out for to make sure the bill works as intended—helping both businesses and their workers.