The change broadens the way companies can participate without creating a national paid leave requirement. It also gives the White House and congressional Republicans a new economic policy to highlight ahead of the November midterm elections, while keeping the cost of the benefit with employers rather than the federal government.
Employers Will Gain Another Way to Qualify for the Tax Credit
The paid leave tax credit was created through President Donald Trump’s 2017 tax law. Under the earlier framework, employers generally had to provide at least two weeks of family or medical leave and replace at least 50% of an employee’s wages while that worker was away.
That structure limited access to the credit for businesses that did not pay wages directly during leave. Many employers instead purchase insurance policies that cover the cost of the benefit, meaning their spending did not qualify under the previous interpretation.
According to Reuters, the updated guidance will permit employers to claim the tax credit when they pay premiums for those insurance policies. Three people familiar with the plans said the change was expected to be announced by the Treasury Department on Wednesday.
Treasury Secretary Scott Bessent is scheduled to present the policy alongside House Speaker Mike Johnson and Representative Juan Ciscomani of Arizona. Ciscomani is considered one of the more vulnerable Republican incumbents in the House as the party prepares for competitive midterm races.
“Hardworking Americans should not have to choose between caring for a loved one and earning a paycheck,” Bessent said in a statement. White House spokesman Kush Desai called the policy “another historic win for working parents.” The measure was included in Trump’s One Big Beautiful Bill Act, a wider tax and immigration package that Republicans plan to feature prominently during the election campaign.
The Policy Relies on Voluntary Employer Participation
The United States does not require employers nationwide to provide paid family or medical leave. According to Reuters, it is the only member of the 38-nation Organisation for Economic Co-operation and Development without such a mandate.
Rather than establishing a federally funded leave program, the administration is using tax incentives to encourage businesses to offer the benefit voluntarily. The revised rules are designed to make the existing credit available to a larger group of employers by recognizing insurance premiums as an eligible expense.
The approach has long been supported by Republican Senator Deb Fischer of Nebraska. She has argued that tax credits provide employers with more flexibility while limiting direct costs to the federal government.
The announcement also arrives as Republicans face pressure on economic issues. A Reuters/Ipsos poll released Monday found that voters preferred Democratic handling of the economy by 37% to 36%. Registered voters also favored Democrats by five percentage points on a generic congressional ballot.
