Tax Credits Still Available for Sick and Family Leave

Small and midsize businesses and certain governmental employers eligible for tax credits for COVID-19-related issues.

As you may know, the IRS and the Treasury Department announced in April that, under the American Rescue Plan Act of 2021 (ARP), tax credits may be available to help small and midsize employers, and certain governmental employers, that pay wages for sick and family leave to employees who take leave for COVID-19-related reasons between April 1, 2021, and September 30, 2021.

Eligible employers, including businesses and tax-exempt organizations with fewer than 500 employees, can receive a tax credit for providing paid time off for each employee receiving the COVID-19 vaccine and for any time needed to recover from the vaccine. For example, under the ARP, if an eligible employer offers employees a paid day off to receive a COVID-19 vaccination, the employer can claim a refundable tax credit equal to the wages paid to those employees for that day (up to certain limits).

The IRS points out that the paid leave credits are tax credits against the employer's share of the Medicare tax. The tax credits are refundable, which means the employer is entitled to payment of the full amount of the credits if it exceeds the employer's share of the Medicare tax.

To claim the credit, or to learn more about the details of the tax credit as it relates to paid sick leave and paid family leave, please visit irs.gov.

The tax information contained herein is for informational purposes only. You should consult your financial adviser or attorney regarding your individual circumstances.

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