Self Employed Individuals May Qualify for up to $5,110 Sick and Family Leave Pay Tax Credits

This tax credit is worth up to $5,110 can be claimed by self employed individuals. The IRS recently issued updated guidance on how self-employed individuals can cash in on this special COVID-related tax break.

Eligible self-employed individuals are allowed an income tax credit to offset their federal self-employment tax for any taxable year equal to their “qualified sick leave equivalent amount” or “qualified family leave equivalent amount.”

To be eligible for sick leave, a self-employed individual must be unable to work or telework because the individual:

  1. Is subject to a government quarantine or isolation order related to COVID;

  2. Has been advised by a health care provider to self-quarantine due to concerns related to COVID; or

  3. Is experiencing symptoms of COVID and seeking a medical diagnosis.

The qualified sick leave equivalent amount is equal to the number of days the individual cannot perform services in their business for one of the three above reasons, multiplied by the lesser of $511 or 100 percent of the “average daily self-employment income” of the individual for the taxable year. Average daily self-employment income is an amount equal to the net earnings from self-employment for the taxable year divided by 260.

For an eligible for family leave, a self-employed individual must be unable to work or telework because the individual:

  1. Is caring for an individual who is subject to a government quarantine or isolation order related to COVID, or has been advised by a health care provider to self-quarantine due to concerns related to COVID;

  2. Is caring for a child if the child’s school or place of care has been closed, or child care provider is unavailable due to COVID-precautions; or

  3. Is experiencing any other substantially similar condition specified by the HHS Secretary.

The qualified sick leave equivalent amount is equal to the number of days during the taxable year that the individual cannot perform services in their business for one of the three above reasons, multiplied by the lesser of $200 or 67 percent of the “average daily self-employment income” of the individual for the taxable year.

In either case, the maximum combined number of days a self-employed individual may take into account in determining the qualified sick or family leave equivalent amount is ten.

These credits can be claimed in the self-employed individual’s Form 1040.

  • Mark S Gleason CPA


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