COVID-19: Tax provisions for veterinary small businesses

Updated on March 16, 2021

The federal government's most recent COVID-19 stimulus relief package, the American Rescue Plan, provides extensions and modifications to COVID-19 tax provisions from earlier relief legislation.

Highlights include:

  • Extension of the tax credits for employers that offer paid family and medical leave: The bill does not reinstate the mandatory paid family and sick leave from the CARES Act. Instead, it extends the tax credit to September 30, 2021 for eligible employers for the full amount of the voluntarily offered sick leave and family leave, health plan expenses, plus the employer's share of Medicare tax on the leave.
  • Extension of the Employee Retention Tax Credit (ERTC) until December 31, 2021 and expansion of what wages qualify for certain distressed businesses. Earlier legislation increased the credit rate for 2021 to 70% of qualified wages per employee up to $10,000 per quarter. Paycheck Protection Program (PPP) borrowers may also still qualify for ERTC, reversing earlier legislation that precluded this.

The COVID 19 Economic Relief bill passed in December 2020 clarified that borrowers of PPP loans can take tax deductions for ordinary business expenses paid for with PPP loans. When the program was created, Congress intended for PPP recipients to be able to deduct the payroll costs and other expenses covered by forgiven loans, even though the loans themselves are tax-free income. The tax fix reverses the IRS ruling that denied the deductions and, depending on where a veterinarian lives, will mean that up to 40% of the amount of a PPP loan stays within the veterinary practice instead of being paid in taxes.

It's important for veterinarians to consult with their advisors to understand the impact of electing certain tax credits. AVMA will continue to update this website as more information becomes available, and additional guidance on COVID-19 tax provisions is available on the IRS website.

This information should not be construed as tax or financial advice. AVMA encourages veterinary business owners to consult with a professional to find out how to best utilize these new provisions.