COVID-19 Vaccination Tax Credits for the Self-Employed and Employers

The federal government wants everyone to get COVID-19 vaccinated. Generous tax credits are available to the self-employed and businesses to help defray the cost of lost work time due to COVID-19 vaccinations.

Hundreds of millions of Americans are taking time off work to get vaccinated against COVID-19. And many take off more time due to the vaccine‘s side effects—usually flu-like symptoms that last a few days.

Wouldn't it be great if the government would reimburse you for the time lost getting vaccinated or recovering from the vaccine? In many cases, it will:

  • If you're self-employed, you can get a special temporary sick leave tax credit of up to $5,110.
  • If you're an employee, you won't be reimbursed directly by the government, but your employer can give you paid sick leave to get vaccinated and qualify for its own tax credit to defray the cost.

Tax Credit for the Self-Employed

If you're self-employed, you don't have an employer to provide you with paid sick leave or family leave if a family member gets ill. However, Congress has made tax credits temporarily available to self-employed taxpayers who become ill due to COVID-19, must care for a family member who becomes ill, or care for a child who must stay at home due to the pandemic. These credits match the credits given to employers who provide their employees with COVID-related paid sick leave and family leave.

This includes a sick leave tax credit if, from April 1, 2021, through September 30, 2021, you are unable to work or telework because you are:

  • obtaining a COVID-19 vaccination, or
  • recovering from any injury, disability, illness, or condition related to such vaccination.

You can get a credit for up to 10 total days (80 hours) of sick leave. The credit is equal to 100% of the average net self-employment income you earn per day, capped at $511 per day. Figure your average daily net self-employment income by dividing your total net self-employment income for the year or the prior year by 260. Use the prior year if you earned more money that year.

Example: Jack is a self-employed business owner whose net self-employment income for 2021 is $100,000. His average 2021 daily net self-employment income is $385 ($100,000 ÷ 260 = $385). He takes one day off work during May 2021 to get his first injection of the COVID-19 vaccine. He takes another day off in June to get his second injection and takes two more days off to recover from the side effects of the second dose. He may claim a sick leave credit of 4 days x $385 = $1,540.

This is a refundable tax credit, which means you get the full amount even if it exceeds your tax liability for the year. For example, if Jack in the above example only owes $1,000 in tax for 2021, his $1,540 credit will reduce his tax liability to 0, and the IRS will send him a check for $540. If he owed no taxes, he'd get a $1,540 check.

You claim this credit on new IRS Form 7202, Credits for Sick Leave and Family Leave for Certain Self-Employed Individuals, which you include with your Form 1040. However, you have the option of claiming it in advance by reducing your quarterly income tax payments by the anticipated amount of the credit. For example, Jack from the above example could reduce his June 15, 2021, estimated income tax payment by $1,540.

If you and your spouse are both self-employed, you may both claim a separate credit. A separate Form 7202 should be filed for each spouse.

You aren't' required to see a doctor to claim this credit. However, you should create a record containing:

  • the dates you were unable to work or telework because you obtained or recovered from a COVID-19 vaccination, and
  • a statement that you could not perform services in your business (including teleworking) because of your COVID-19 vaccination.

You don't need to file this with your tax return. Just keep it with your tax records for at least four years.

Tax Credit for Employers

Unlike the self-employed, employees don't qualify for a tax credit for getting vaccinated. However, their employers may give them paid sick leave for the time they take off to get the vaccine. Employers are not required by the federal government to provide their employees with such sick leave, but are strongly encouraged to do so.

Businesses with employees that provide their employees with such sick leave may obtain a tax credit very similar to the self-employed credit described above to compensate them for the cost. A business qualifies for this credit if it:

  • has under 500 employees;
  • offers paid sick leave to its employees through September 30, 2021; and
  • has employees who take paid leave to get COVID vaccinated and/or recover from a vaccination.

For April 1, 2021, through September 30, 2021, businesses may take a sick leave tax credit for wages up to ten days (80 hours) of paid sick leave in an amount equal to the employee's regular wage, capped at $511 per day, up to a total of $5,110.

Example: Acme, Inc. has 10 employees. Acme provides them each with one day of paid sick leave to obtain COVID-19 vaccinations. The sick leave cost Acme $4,000. Acme is entitled to a sick leave credit for $4,000.

This is a refundable tax credit—a business gets the full amount even if it exceeds its tax liability. A business can claim this credit in advance by reducing the employer payroll taxes it otherwise would have deposited with the IRS each quarter. If the amount of the credit exceeds a business's portion of its payroll taxes, it may request an advance by filing IRS Form 7200, Advance Payment of Employer Credits Due to COVID-19. The IRS will then pay the excess amount directly to the business.

If you're an employee who would like to have paid time off to obtain or recover from a COVID-19 vaccination, be sure to let your employer know about this credit. The IRS has created a Fact Sheet with more details.

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