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New Tax Credit Available to Small Businesses Providing Paid Leave to Employees to Obtain COVID-19 Vaccine

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In an effort to encourage Americans to receive the COVID-19 vaccine, President Biden has announced a paid leave tax credit available through the American Rescue Plan for employers that pay employees to take time off from work to receive their vaccine as well as paid time off for employees needing any recovery time from the vaccine.

Who is Eligible?

The American Rescue Plan states that businesses and tax-exempt organizations that have fewer than 500 employees can claim the tax credit for each employee who is unable to work or telework due to COVID-19, meaning those employees needed to take leave to receive the vaccination, or take leave to recover from any injury, disability, illness or condition related to the vaccination. Governmental employers other than federal government employers are also eligible, excluding 501(c)(1) organizations.

When Are the Tax Credits Available?

The credits are available for wages paid for leave taken from April 1, 2021 through September 30, 2021. The tax credit covers up to 10 days or 80 hours of paid sick leave and is limited to a maximum of $511 per day. The tax credits are refundable if the credit exceeds employer’s share of Medicare Tax.

How Can Employers Claim the Tax Credit for COVID-19 Vaccinations?

Employers that are eligible can report their total paid leave wages for each quarter on their federal employer’s quarterly tax return, typically Form 941, or Form 7200 for advanced payments. We suggest consulting with your tax professional regarding determining your eligibility and how to properly claim the tax credit.

As always, do not hesitate to reach out to a member of our team with any questions. We are here to help.

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