Skip to content

Covid-19 Vaccination Tax Credit: How Businesses Can Benefit

One Minute Takeaway

  • Small businesses who offer paid sick leave for vaccinations can claim tax credits
  • Credits extend to $511 per employee, per day, for up to 80 hours
  • The tax credits are valid through September 30

More than a million Americans are vaccinated every day, with federal and state government doing everything they can to make the process as simple as possible. Sometimes, employees worry about that getting their shot and, potentially, feeling unwell afterwards, will take up too much of their working time. Now, the Biden administration is offering tax credits for small businesses who offer paid sick leave for vaccinations.

Encouraging Vaccinations at Work

Every business has a responsibility to provide a safe workplace for their employees. Right now, a big part of that means ensuring as many workers as possible are vaccinated. Only when a majority of employees are vaccinated can be get back to something close to normal. There’s a place for a vaccination policy, but in most industries mandating vaccines is probably a bad idea.

Instead, employers should concentrate on making it as easy as possible for workers to get vaccinated. Consider subsidizing transport to vaccination sites or even offering cash incentives. Businesses can also invest in materials explaining the importance of vaccinations and outlining how safe and effective they have been shown to be.

Employees Worry About Missing Work

It’s natural for employees to worry about having to take time off to get vaccinated. Will they fall behind on important projects or be forced to take personal leave? While many recipients of Covid-19 vaccinations suffer no adverse effects, others may feel ill for several days. It’s common to experience fatigue or fever—that’s why the CDC recommends scheduling vaccinations before non-working days.

HR leaders should reassure their people that their health is the highest priority and give all employees the time they need to receive and recover from vaccinations. Now, small businesses and nonprofits have an added incentive to do this, in the form of a tax credit.

The Vaccination Tax Credit

The Biden government is offering the tax credit under the program of tax credits laid out in the American Rescue Plan, which offers compensation to employers who offer paid sick leave to employees for a variety of reasons related to Covid-19.

Here’s what business need to know:

  • The tax credit applies to businesses and nonprofits with fewer than 500 employees
  • It covers up to $511 per day for up to 80 hours, at 100% of an employee’s rate of pay
  • The program is valid through September 30

For more details, consults this white house fact sheet.

How Can Employers Claim the Vaccination Tax Credit?

The Internal Revenue Service (IRS) has offered guidance instructing employers how they can claim the vaccination tax credit. The tax credit, like others under the American Rescue Plan, are calculated against employers’ Medicare taxes. If the full amount of the credit exceeds the value of an employer’s Medicare taxes, the remaining amount of credit will be paid in full.

Employers can claim the credit by reporting their paid sick leave wages for each quarter on Form 941, their federal employment tax return. Eligible employers can keep the federal employment taxes (including both the employee and employer’s share of Medicare and social security taxes) they would otherwise deposit, up to the amount to which they will be entitled by the vaccination tax credit.

If this is insufficient to cover the amount required, employers can request an advance of the credit using Form 7200. For more details, consult the IRS fact sheet.

How Paycor Helps

Paycor builds HR solutions for leaders. With Paycor, you can modernize every aspect of people management, from the way you recruit, onboard and develop your team, to the way you pay and retain them. See how Paycor can help the leaders of your organization solve the problems of today and tomorrow.