Federal Tax Credit — Permanent under OBBBA 2025
Estimate Your Section 45S Tax Credit
See how much your company could save each year by offering paid family & medical leave.
Quick Estimate Calculator
Answer 4 questions to get your estimated annual tax credit
Percentage of wages replaced during FMLA-type leave (parental, medical, disability)
Estimated Annual Section 45S Credit
$0per year
Wage-Based Credit
$0
Leave-dependent · per qualifying employee
Premium-Based Credit
No leave required · insurance premium credit
How We Calculated This
State
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Mandate status
—
Total employees
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Eligible employees (≤$96K prior year)
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Leave incidence rate
5%
Qualifying employees (on leave)
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45S credit rate
—
Credit per qualifying employee (wage)
—
Credit per employee (premium)
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Key Assumptions
- Leave incidence: 5% of eligible employees take qualifying FMLA-type leave per year
- Leave duration: 8 weeks average (out of max 12 weeks)
- Employees earning ≤$96,000 in prior year are eligible (non-HCE threshold)
- Non-mandate state: full employer PFML wages qualify for credit
- Premium pathway uses $300/employee annual PFML premium estimate
This estimate is for illustrative purposes only and does not constitute tax advice. Actual Section 45S credit amounts depend on specific plan details, employee demographics, and IRS qualification requirements. Consult a qualified tax advisor for precise calculations.
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How Section 45S Works
1
Offer Paid Leave
Provide at least 2 weeks of FMLA-type paid leave at 50%+ wage replacement to all eligible employees.
2
Claim the Credit
Earn 12.5% to 25% of qualifying wages as a federal tax credit, depending on your wage replacement level.
3
Save Every Year
Section 45S is now a permanent credit under OBBBA 2025. Claim it annually with no expiration.
Frequently Asked Questions
Who qualifies for the Section 45S credit?
Any employer that provides paid family and medical leave to qualifying employees can claim the credit. Employees must earn $96,000 or less in the prior tax year. The leave plan must offer at least 2 weeks of paid leave at a minimum of 50% wage replacement to all employees who customarily work 20+ hours per week.
What's the difference between wage-based and premium-based credits?
Starting in 2026, employers can elect to claim the credit on actual wages paid during leave (wage-based) or on premiums paid for a qualifying PFML insurance policy (premium-based). The premium pathway doesn't require employees to actually take leave, making it more predictable.
How does my state's PFML mandate affect the credit?
In mandate states (like CA, NY, NJ, WA, etc.), only wages or premiums above the state-required minimum qualify for the 45S credit. In non-mandate states (like TX, FL, OH, etc.), the full employer PFML contribution qualifies, typically resulting in a larger credit.
Is Section 45S a permanent credit?
Yes. The One Big Beautiful Bill Act (OBBBA) of 2025 made Section 45S permanent with enhancements including the new premium-based pathway. It applies to tax years beginning after December 31, 2025.