Businesses and tax-exempt organizations with less than 500 employees — including banks and credit unions — can receive a tax credit toward Medicare taxes they pay for providing paid time off for each employee receiving an anti-COVID-19 vaccination and for any time needed to recover from the injection, the Treasury and the IRS said Wednesday.
The announcement came after comments earlier in the day by President Joe Biden (D) outlining the program in a televised address.
The Treasury and tax agency said that, as an example of use of the program, if an eligible employer offers employees a paid day off to be vaccinated the employer can receive a tax credit equal to the wages paid to its workers for that day (up to certain limits).
The program is based on provisions in the American Rescue Plan (ARP), enacted into law March 11 with Biden’s signature, part of a $1.9 trillion plan to provide economic stimulus in the wake of the financial impact of the coronavirus crisis.
According to a fact sheet released by the agencies, paid leave credits under the program 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.
The fact sheet also noted that 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 twelve weeks, limited to $200 per day and $12,000 in the aggregate, at 2/3rds of the employee’s regular rate of pay, the fact sheet notes. “The amount of these tax credits is increased by allocable health plan expenses and contributions for certain collectively bargained benefits, as well as the employer’s share of social security and Medicare taxes paid on the wages (up to the respective daily and total caps),” the sheet states.