Vaccine Tax Credit: Which Business Can Claim COVID Support and How

Some small businesses and non-profit organizations can claim a "paid leave tax credit" to fully offset the costs of providing paid sick leave to employees getting a COVID-19 vaccine and recovering from the after-effects of vaccination, President Joe Biden announced Wednesday.

Employers can also claim the credit to cover the costs of providing paid family leave to workers "taking time to care for someone quarantining or to provide care due to COVID-19 school or child care provider closures," the U.S. Department of the Treasury explains.

Eligible employers can claim the tax credit by withholding the relevant amount from the federal employment taxes they would have otherwise deposited, the IRS advises.

The paid leave tax credit can be claimed "for up to 80 hours (i.e. 10 work days) up to $511 per day of paid sick leave offered between April 1 and September 30, 2021," the White House said in a statement Wednesday.

Who can claim the COVID-19 vaccine tax credit?

Any business, including a tax-exempt organization, with fewer than 500 workers is eligible to claim the paid leave tax credit.

The Internal Revenue Service notes: "An eligible employer also includes a governmental employer, other than the federal government and any agency or instrumentality of the federal government that is not an organization described in section 501(c)(1) of the Internal Revenue Code."

"Self-employed individuals are eligible for similar tax credits," the federal body adds.

How much can be claimed?

Employers can claim up to $17,110 for 14 weeks of paid leave "for each impacted employee" who takes time off for the following COVID-19-related reasons, as outlined by the White House:

  • They are getting vaccinated against COVID-19.
  • They have COVID-19 symptoms and are visiting a doctor.
  • They are getting tested for COVID-19.
  • They are under a quarantine or isolation order by the government or a doctor (or are caring for someone who is).
  • They have to care for a child whose school or care provider closed due to COVID-19.

How to claim the COVID-19 vaccine tax credit

The Treasury explains: "Businesses that pay employees for qualifying leave can take the tax credit against their share of certain payroll taxes.

"If the amount of the credit exceeds a business's portion of its payroll taxes, then the excess is refunded—paid—directly back to the business. Businesses can file quarterly for this credit through September 30, 2021," it adds.

Businesses who don't have enough federal employment taxes set aside to cover the paid sick and family leave, "plus the eligible health plan expenses and collectively bargained contributions and the eligible employer's share of social security and Medicare taxes on the paid leave wages," may request an advance of the credits by submitting Form 7200 (Advance Payment of Employer Credits Due to COVID-19), the IRS advises.

"The eligible employer will account for the amounts received as an advance when it files its Form 941, Employer's Quarterly Federal Tax Return, for the relevant quarter," the federal body says.

Those who are self-employed "may claim comparable tax credits" on their individual tax return (Form 1040), the IRS adds.

Some employers whose workers took sick leave earlier in the COVID-19 pandemic may be eligible for additional tax credits, according to the Treasury.

"Beginning April 1, 2020, any businesses with fewer than 500 employees were entitled to a tax credit equal to 100 percent of emergency paid leave they provided for qualifying reasons related to COVID-19," the Treasury notes.

See the websites of the IRS, the Treasury and the White House for more information on the paid leave tax credit.

COVID-19 vaccination clinic Connecticut April 2021
People wait in line to receive the COVID-19 vaccine at a mobile vaccination clinic in Bridgeport, Connecticut on April 20. Some employers can claim a tax credit to fully offset the costs of providing paid sick leave for the time it takes employees to get a COVID-19 vaccine and recover from any after-effects of vaccination. Joseph Prezioso/AFP via Getty Images