U.S. Treasury expands paid family leave tax credit for employers

The U.S. Treasury Department announced new guidance on August 5 that broadens a tax credit for employers who provide paid family and medical leave. The credit, first created in the 2017 tax‑cut law, now covers up to 12 weeks of leave and can be claimed even when employers purchase insurance to cover the costs. Treasury Secretary Scott Bessent said the measure gives “greater incentives to provide paid leave so workers can care for a newborn or other family member or recover from a serious illness without sacrificing their financial security.”

The policy is being promoted by White House officials, House Speaker Mike Johnson and Rep. Juan Ciscomani ahead of the November midterm elections, and has long been championed by Sen. Deb Fischer. The United States remains the only OECD country without a mandatory paid family‑leave requirement, making the new credit a key federal effort to expand leave benefits.

Employers who offer at least two weeks of leave covering at least 50 % of an employee’s wages, or who pay insurance premiums for such leave, will be eligible for the credit, which the Treasury hopes will encourage broader adoption of paid family leave across the private sector.