Paid Sick Leave and Child Care Leave Tax Credits
The Paid Sick Leave and Child Care Leave Tax Credits under the Families First Coronavirus Response Act are refundable payroll tax credits to immediately reimburse employers for the cost of providing coronavirus-related leave to their employees. Employers receive 100% reimbursement for paid leave, including health insurance costs. Employers will not face a payroll tax liability. Self-employed individuals may also receive an equivalent credit.
The American Rescue Plan Act was signed into March 11, 2021, extending these tax credits through Sept. 30, 2021. Additional updates include:
- Wages covered by the paid family leave credit increased to $12,000 per worker, from $10,000
- Covers up to 60 days of paid family leave for self-employed individuals, up from 50
- Discourage employers from receiving credits if their paid leave favors highly compensated employees, full-time workers, or employees based on tenure.