On 5 August 2026 the Treasury and the IRS issued Notice 2026-28 under IR-2026-86, providing guidance on the employer credit for paid family and medical leave. The Working Families Tax Cuts made the section 45S credit permanent and widened it, and the notice explains how the expanded version works from 2026 onward.
The headline numbers are worth stating plainly. The credit is worth between 12.5% and 25% of wages paid to qualifying employees, for up to 12 weeks of family and medical leave per taxable year. From 2026 an employer can also claim it against premiums paid for a paid family and medical leave insurance policy, not only against wages paid during leave. Eligibility now reaches employees with six months of service, and part-time employees who customarily work 20 hours or more per week.
For a CPA firm this is not a compliance item. It is an advisory conversation with almost every closely held business client that offers paid leave, or is thinking about it, and does not know a federal credit exists for doing so.
What did the IRS actually issue in August 2026?
Notice 2026-28, announced on 5 August 2026 as IR-2026-86. It is guidance rather than final regulations, and it addresses the practical questions created when the Working Families Tax Cuts made the section 45S credit permanent and expanded it. Forthcoming proposed regulations are expected to address the statute more comprehensively.
The notice deals with three things in particular: how the new premium-based method compares with the established wage-based method, how qualifying premiums are allocated, and how an employer elects between the two methods.
What is the section 45S credit worth?
Between 12.5% and 25% of wages paid to a qualifying employee while on family and medical leave, for up to 12 weeks in a taxable year. The percentage rises with the rate at which the employer pays leave, so a policy that replaces a higher share of normal wages earns a higher credit rate.
It is a general business credit, which means it interacts with the rest of the client's position rather than arriving as a standalone refund. That interaction is precisely the part a business owner will not work out alone.
What changed for 2026?
Three things matter. First, permanence. The credit had previously run on extensions, which made it hard for a client to build a leave policy around it. An employer can now design a policy knowing the credit is not scheduled to lapse.
Second, the premium-based method. From 2026 an employer can claim the credit for premiums paid on a paid family and medical leave insurance policy, in addition to wages paid during leave. That opens the credit to employers who fund leave through insurance rather than directly.
Third, wider eligibility. Employers can claim for employees with six months of service, and for part-time employees customarily working 20 hours or more per week. For businesses with seasonal or part-time staff, that is a material change in who counts.
How do state and local leave mandates interact with the credit?
Carefully, and this is the part most likely to be got wrong. Employers can count leave provided under state or local mandates toward eligibility for the federal credit, but not toward the credit calculation itself.
That distinction matters most for clients operating in states with their own paid leave programmes. The mandated leave helps them qualify. It does not increase the credit. A client who assumes otherwise will budget for a number that does not arrive.
How does the premium method change the advice?
It changes who the credit is available to. Under the wage-based method the employer must be paying wages during leave, which is straightforward for a business that self-funds. An employer who instead buys a paid family and medical leave insurance policy was previously in an awkward position, because the money left the business as a premium rather than as leave wages.
From 2026 the premium route counts. The notice sets out how qualifying premiums are allocated and how an employer elects between the premium method and the wage method, which means the choice is now a planning decision rather than an accident of how the policy was arranged.
For an adviser, the useful question to a client is simple: how do you currently fund leave, and did anyone check whether the other method produces a larger credit. Most clients have never been asked.
What are the practical traps?
Three come up repeatedly. Assuming state-mandated leave increases the credit rather than only supporting eligibility. Assuming the credit applies automatically to any paid time off, when it applies to leave meeting the statutory family and medical leave definitions. And designing a policy at a wage replacement rate that sits just below the threshold that would have earned a higher credit percentage.
The third is the expensive one, and it is invisible unless somebody models the policy before it is adopted. That is advisory work with a clear number attached, which makes it easier to price and easier to explain than most of what practices try to sell as advisory.
Which clients should a firm be calling about this?
Closely held businesses with employees, particularly those with 20 to 200 staff, those in states with paid leave mandates, those that already fund leave through an insurance policy, and those that have been asked by staff for better leave and have parked the conversation on cost.
The last group is the largest and the most valuable. A business owner who decided against a paid leave policy on cost grounds made that decision without a permanent credit worth up to a quarter of the wages involved. That is a conversation worth having before the next planning cycle, not after.
Why is this an advisory opportunity rather than a filing task?
Because the value is in the design of the policy, not in the form. The credit rate depends on how the leave policy is structured and how much of normal wages it replaces. A client who writes a policy first and asks the accountant afterwards usually leaves credit on the table.
That is the shape of the advisory work practices keep saying they want and rarely market. It is also the shape of content that ranks, because business owners search for the practical question rather than the code section. Our guide to digital marketing for accounting firms covers why answering the buying question outperforms describing the service.
What should a firm publish about it?
One page that answers what the credit is worth, who qualifies, what changed for 2026, and how state mandates interact with it. Written for a business owner, not for a peer. Four hundred to eight hundred words, with the numbers stated rather than alluded to.
Then a short client email to the segment above, saying what changed and offering a conversation before the next payroll year is set. That email will out-perform a quarter of newsletter output, because it names a decision the reader is actually facing.
Firms that do this well tend to have already built the habit on other changes. The practices that moved early on the 2026 W-2 tips and overtime codes had the list, the page and the email ready when the guidance landed, and they picked up the searches the change created.
What does the content need to include to be found?
The specific numbers, because those are what people search and what AI assistants cite. The 12.5% to 25% range. The 12-week cap. The six-month service requirement. The 20-hour part-time threshold. The distinction between eligibility and calculation for state-mandated leave. Notice 2026-28 and its date.
Pages that summarise guidance without repeating the figures get skipped in favour of pages that state them. This is unglamorous, and it is most of what separates a practice page that earns enquiries from one that sits unread.
How does this fit a firm growth plan?
It is one item on a calendar, not a strategy. The firms that grow online do it by publishing consistently against changes their clients face, then linking those posts to the service pages that convert. One post about a leave credit does very little. Twelve posts across a year, each tied to a real change, builds a body of work that both search engines and prospective clients treat as evidence of a firm that is paying attention.
Our digital marketing for CPA firms in the USA page sets out how we structure that programme, and most of the compounding comes from search engine optimisation work applied to advisory content rather than to service pages alone. We hold more than 90% client retention, and the reason is that the reporting shows which posts produced enquiries and which did not.
What to do this week
Pull the client list. Filter for employers with staff, then for those in paid leave mandate states, then for those already carrying a leave insurance policy. Read Notice 2026-28 against that list rather than in the abstract.
Then write the page. The guidance is three weeks old, the proposed regulations have not landed, and almost nobody in the profession has published a plain-language explanation of what the expanded credit is worth. That gap will close. It has not closed yet.
FAQs
How much is the section 45S paid family and medical leave credit worth?
Between 12.5% and 25% of wages paid to a qualifying employee during family and medical leave, for up to 12 weeks per taxable year. The percentage rises with the rate at which the employer replaces normal wages, so a more generous leave policy earns a higher credit rate. It is a general business credit.
What did Notice 2026-28 change?
Announced on 5 August 2026 as IR-2026-86, Notice 2026-28 gives guidance on the credit after the Working Families Tax Cuts made it permanent and expanded it. It covers how the new premium-based method compares with the wage-based method, how qualifying premiums are allocated, and how an employer elects between the two.
Can an employer claim the credit for insurance premiums?
Yes, from 2026. Employers can claim the credit for premiums paid on a paid family and medical leave insurance policy in addition to wages paid during leave. That opens the credit to employers who fund leave through insurance rather than paying wages directly, and the notice explains how to elect between the two methods.
Which employees now qualify?
Eligibility reaches employees with six months of service, and part-time employees who customarily work 20 hours or more per week. For businesses with seasonal or part-time staff that is a material widening compared with the previous rules, and it changes which clients are worth reviewing.
Do state paid leave mandates count toward the credit?
Employers can count leave provided under state or local mandates toward eligibility for the federal credit, but not toward the credit calculation. Clients in mandate states often assume the opposite, and budget for a credit larger than the one they will receive. The distinction is worth stating explicitly in client communications.
Why should a CPA firm publish content about this credit?
Because business owners search the practical question rather than the code section, and very few firms have published a plain-language explanation of the expanded credit. Stating the actual figures gives search engines and AI assistants something to cite, and gives clients a reason to start the conversation with you.