New Paid Leave Tax Credit Will Offset Cost for Small- and Medium-Sized Businesses

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Yesterday, President Biden announced a new paid leave tax credit that will offset the cost for small- and medium-sized businesses to provide full pay for any time their employees need to get a COVID-19 vaccination or recover from side effects.

“No working American should lose a single dollar from their paycheck because they fulfilled their patriotic duty to get vaccinated,” Biden said. “Every employee should get paid leave to get a shot. And businesses should know that they can provide it without a hit to their bottom line.”

This new tax credit will apply to nearly half of all private sector employees in America. Here’s what you need to know about the program:

Who qualifies for the Paid Leave Tax Credit?

  • Businesses and nonprofits with fewer than 500 employees
  • Government employers other than the federal government
  • Self-employed individuals

For more information, the Department of the Treasury offers a Paid Leave Tax Credit Fact Sheet with additional details on eligibility and program guidelines.

How does the tax credit work?

The paid leave tax credit will offset the costs for eligible employers for up to 80 hours of paid sick or family leave (i.e. 10 work days) up to $511 per day between April 1 and Sept. 30, 2021.

The paid leave credits 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.

Eligible employers are entitled to tax credits for wages paid for leave taken by employees who are not able to work or telework due to reasons related to COVID-19, including leave taken to receive COVID–19 vaccinations or to recover from any injury, disability, illness, or condition related to the vaccinations.

How do I claim my tax credit?

Business owners will be able to claim the tax credit on their quarterly tax filings. For more information, the IRS offers a fact sheet and additional resources to educate employers on program requirements and how to claim the paid leave credit.


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