COVID-19 Vaccinations

On April 21, the IRS announced details of how small and midsize businesses may claim a tax credit, available under the American Rescue Plan Act of 2021, for providing paid leave to their employees to receive the COVID-19 vaccination and for any time needed to recover from any side effects from the vaccine.

Who is eligible?

  • Businesses and tax-exempt organizations with fewer than 500 employees
  • Certain governmental employers
  • Self-employed individuals

How much is the credit?

The tax credit is an expansion of the sick leave wage credit, for COVID-19 related reasons, for up to 80 hours of paid sick leave (limited to $511 per day and $5,110 in total).  The credit is for wages paid by eligible employers for leave taken by employees between April 1 and September 30, 2021.

These paid leave credits are tax credits against the employer’s share of the Medicare tax and are now refundable. This means that the employer is entitled to payment of the full credits if this amount exceeds the employer’s share of the Medicare tax.

How do I claim the tax credit?

Eligible businesses can claim the credit on their federal quarterly employment tax return (Form 941), or they can keep the federal employment taxes they otherwise would have deposited instead of claiming the credits on Form 941. These taxes include: 1) federal income tax withheld from employees; 2) the employees’ share of social security and Medicare taxes; and 3) the eligible employer’s share of social security and Medicare taxes regarding all employees (up to the amount of credit for which they are eligible). 

Self-employed individuals may claim comparable tax credits on their Form 1040.

For more information please visit COVID-19-Related Tax Credits for Paid Leaves Provided by Small and Midsize Businesses FAQs and the IRS Newsroom.

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