Tax Credits

Employer Tax Credits Extended for Employee Paid Leave Due to COVID-19

CPAs & Advisors

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The American Rescue Plan Act of 2021 (ARPA) allows small and midsize employers, and certain governmental employers, to claim refundable tax credits that reimburse them for the cost of providing paid sick and family leave to their employees due to COVID-19. This includes leave taken by employees to receive or recover from COVID-19 vaccinations.

The ARPA tax credits are available to eligible employers that pay sick and family leave for leave from April 1, 2021, through September 30, 2021.

  • The credits have been extended through September 20, 2021.

  • Employers are encouraged to offer paid leave to employees to receive or recover from vaccinations, but it is not mandated.

  • The Paid Health Emergency Leave has been increased from a maximum of $10,000 to a maximum of $12,000 per employee.

  • ARPA expands the qualifying reasons for which leave can be taken (and tax credit claimed) under the Emergency Paid Sick Leave (EPSL) and/or the Emergency Family Medical Leave (EFML), to include leave:
    • to obtain COVID-19 immunization;
    • to recover from an injury, disability, illness or condition related to the COVID-19 immunization; and
    • to seek or await the results of a test for medical diagnosis of COVID-19, where the employee has been exposed to COVID-19 or the employer has requested such a test from the employee.
  • ARPA strikes the provision in the FFCRA requiring the first two weeks of paid Extended FMLA (Paid Health Emergency Leave) to be unpaid. That is why the maximum allotment per employee has been adjusted from $10,000 to $12,000.

  • The reasons for which the expanded family and medical leave may be taken have also been broadened. Under the FFCRA, the qualifying reasons for leave were limited to instances where an employee needed to care for their child because the child’s school was closed or the childcare provider was unavailable due to COVID-19. Under ARPA, all of the reasons for which emergency paid sick leave may be provided are qualifying reasons for the expanded family and medical leave.

  • ARPA resets the 10-day (or 80-hour) allotment limit on Emergency Paid Sick Leave (EPSL) effective April 1, 2021.

  • School districts can now receive credits.

Please read the IRS Fact Sheet to learn more about which employers are eligible for the tax credits and how employers may claim the credit.

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