American Rescue Plan (ARP) Tax Credits Available to Employers for Paid Leave to Employees Receiving COVID-19 Vaccinations
The Treasury Department and the IRS announced recently that businesses with fewer than 500 employees might be eligible to take tax credits to offset paid leave provided to employees who received the Covid-19 vaccination. Self-employed individuals are similarly eligible to take the credits.
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 total amount of the credits if it exceeds the employer’s share of the Medicare tax.
The tax credit for paid sick leave wages is equal to the sick leave wages paid for COVID-19 related reasons for up to two weeks (80 hours), limited to $511 per day and $5,110 in the aggregate, at 100% of the employee’s regular rate of pay. The tax credit for paid family leave wages is equal to the family leave wages paid for up to 12 weeks, limited to $200 per day and $12,000 in the aggregate, at 2/3rds of the employee’s regular rate of pay. The amount of these tax credits is increased by allocable health plan expenses and contributions for certain collectively bargained benefits and the employer’s share of social security and Medicare taxes paid on the wages (up to the respective daily and total caps).
The tax credits currently run from April 1, 2021, through September 30, 2021.