Employer Tax Credit for Vaccine-Related Sick Leave

4/30/2021 - By David W. Uslan, CPA

On April 21, 2021, the Internal Revenue Service (IRS) announced further details about tax credits available under the American Rescue Plan (ARP) to help small businesses, including providing paid leave for employees who receive COVID-19 vaccinations.

The additional details, provided in a fact sheet they released, spell out some basic facts about employers that are eligible for the tax credits. It also provides information on how these employers may claim the credit for leave paid to employees related to COVID-19 vaccinations. 

Eligible employers, such as businesses and tax-exempt organizations with fewer than 500 employees and certain governmental employers, can receive a tax credit for providing paid time off for each employee receiving the vaccine and any time needed to recover from the vaccine. For example, if an eligible employer offers employees a paid day off in order to get vaccinated, the employer can receive a tax credit equal to the wages paid to employees that day.

The tax credit is equal to the sick leave wages paid for up to two weeks (80 hours), limited to $511 per day and $5,110 in the aggregate, at 100 percent of the employee's regular pay rate.   

The paid leave credits under the ARP are tax credits against the employer's share of the Medicare tax. The tax credits are refundable, which means that the employer is entitled to payment of the full amount of the credits if it exceeds the employer's share of the Medicare tax.

Questions?

If you have any questions, please feel free to contact our Tax team! Visit our COVID-19 resource hub for ongoing updates and information. Due to the ever-changing nature of this event, you should always consult the appropriate professionals. 

Related Posts