woman receiving a vaccine
Small business employers can be reimbursed for employee time off for vaccination. — Getty Images/Geber86

For more information on how to help get your employees vaccinated check out the U.S. Chamber Foundation's downloadable Employee Vaccination Guide.

Earlier this year, Congress passed the American Rescue Plan Act of 2021 (ARP), which included a tax credit for small employers that offered paid time off for receiving and recovering from the COVID-19 vaccine. This tax credit makes it easier for businesses to incentivize their workforce to get vaccinated, as well as give employees the proper time they need to get vaccinated and recover from it if they experience side effects.

According to Tom West, deputy assistant secretary of the U.S. Treasury Department’s Office of Tax Policy, some individuals who are open to getting vaccinated but haven’t done so yet are holding off because they’re worried about taking time off from work.

“One of the reasons [people] cite for not [getting vaccinated], or being hesitant to do so, is that they can't afford to take time off from work,” said West during a recent CO— Small Business Update about the vaccine tax credit. “And so [the government is] working with employers and encouraging employers to give time off, [because it is] going to give those employers tax credits for the paid leave they give to those individuals. We feel like that's a win-win situation.”

In July 2021, the IRS announced it would expand the existing tax credit to cover employees who took paid time off to accompany or care for a family member who receives the vaccination. Here's what employers need to know about the newly-expanded tax credit and what it covers.

[Read more: Incentives to Encourage Employees to Get the COVID-19 Vaccine]

What is the COVID-19 vaccine employer tax credit?

The original employer tax credit for COVID-19 vaccine paid time off was announced in April 2021. It allowed eligible businesses and nonprofits to be reimbursed for up to 80 hours of paid sick leave or family leave (10 days or two work weeks) given to any employee to get vaccinated or recover from vaccination side effects. The reimbursement of $511 per day or $5,110 in total is deducted from the employer-portion of Medicare taxes and applies to paid time off taken between April 1 and September 30, 2021.

The July 2021 update to the ARP’s paid sick leave and family tax credits now allows employers to claim tax credits for paid time off given to employees to get vaccinated themselves or to accompany a family or household member to get vaccinated. It also includes paid time off for employees who need to take care of a family or household member that is recovering from vaccine side effects.

In the rare case of an employee needing time off beyond 10 days, employers may be eligible for 10 additional weeks of reimbursable paid time off at a rate of up to $200 per day ($12,000 in total). These tax credits are available to any for-profit, nonprofit or tax-exempt employer with fewer than 500 employees.

“Those are really significant dollar figures we're talking about,” said West. “This is all about incentivizing employers to give time off to help their employees handle the COVID situation. A vaccinated workforce is a safer workforce.”

[Read more: Mandating Employee Vaccinations? What You Need to Know]

What does the credit cover?

Employers are able to collect tax credits through the federal government by offering paid time off for their employees for the following reasons:

  • Recovering from COVID-19

  • Taking care of a family or household member who has COVID-19

  • Quarantining after exposure from COVID-19

  • Going to get or taking a family member to get vaccinated

  • Recovering from or taking care of a family or household member who has possible side effects of the vaccine

To learn more about these COVID-19 vaccine tax credits and how they can impact your business, read the U.S. Chamber of Commerce’s fact sheet, then watch our Small Business Update event here.

CO—is committed to helping you start, run and grow your small business. Learn more about the benefits of small business membership in the U.S. Chamber of Commerce, here.

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