There is no federal parental leave subsidy - there is a tax credit
The United States has no federal program that pays an employer a monthly subsidy for granting parental leave. What federal law offers instead is a tax credit: 26 U.S.C. ยง45S, the employer credit for paid family and medical leave. A handful of states run their own paid family leave insurance funds financed by payroll contributions, but those pay the employee, not the employer. This calculator estimates the federal credit.
How the credit is computed. The credit starts at 12.5 percent of the wages paid during leave when the employer pays 50 percent of normal wages, and rises by 0.25 percentage points for every additional percentage point of wage replacement, reaching 25 percent when leave is fully paid. Leave paid at less than 50 percent of normal wages earns no credit, and no more than 12 weeks per employee per tax year count.
Legal basis and conditions. Section 45S also requires a written policy giving qualifying full-time employees at least two weeks of paid family and medical leave each year, with a pro-rated amount for part-time staff, and limits the credit to employees whose prior-year compensation was under a statutory threshold. Paid leave mandated by state or local law does not count toward the credit. Figures are current as of September 2026; confirm the credit is available for your tax year.
This tool produces an estimate under the statutory formula and does not confirm that your policy qualifies. Eligibility, the compensation threshold, coordination with state programs and the actual amount allowed are determined on your filed return and by the IRS. This calculator is for reference only and is not legal or tax advice. Consult a licensed attorney or CPA about your specific situation.
Frequently Asked Questions
No. Leave that a state or local government mandates is excluded, so only the portion an employer provides voluntarily under its own written policy counts.
The statute scales the credit with wage replacement: 12.5 percent at half pay, rising 0.25 points per extra percentage point, up to 25 percent at full pay.