The COVID-19 pandemic has left self-employed workers, including freelancers and independent contractors, unable to work or facing a significant drop in revenue.
Fortunately, the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief and Economic Security (CARES) Act offer some self-employed tax credits that can help.
While you'll find an overview of how these self-employed tax credits can benefit you below, for additional guidance on coronavirus relief, be sure to check out our Self-Employed Coronavirus Relief Center to get up-to-date information and tax advice.
The tax credit for paid sick leave applies to eligible self-employed taxpayers who are unable to work (including telework or working remotely) due to:
- Being subject to a federal, state, or local quarantine or isolation order due to COVID-19.
- Being advised by a health care provider to self-quarantine due to COVID-19.
- Experiencing COVID-19-related symptoms and seeking a medical diagnosis.
If you meet all of the requirements, you would be eligible for qualified sick leave for each day during the year that you were unable to work for the above reasons (up to 10 days). The tax credit is worth the lesser of
- $511 per day or
- 100% of your average daily self-employment income for the year per day.
The only days that may be taken into account in determining the qualified sick leave equivalent amount are days occurring during the period beginning on April 1, 2020, and ending on December 31, 2020.
Under the expanded Family and Medical Leave Act (FMLA) provision of the FFCRA, you would be eligible for qualified family leave for each day that you were unable to work because
- you were caring for someone else impacted by COVID-19 (up to 10 days), or
- your child's school or child care provider was closed or unavailable due to COVID-19 (up to 50 days).
You can claim a tax credit for the lesser of $200 per day or 67% of your average daily self-employment income for the year per day.
How do I calculate and claim these tax credits?
"Average daily self-employment income" is calculated as your net earnings from self-employment during the tax year, divided by 260. You can estimate your available credit using our Tax Credit Estimator.
You can claim a credit for both qualified sick leave and qualified family leave, but not both for the same time periods.
You can claim both the tax credit for paid sick leave and the tax credit for paid family leave on your 2020 Form 1040 tax return. However, you don't have to wait until the next tax-filing season to benefit from these credits. You can estimate your credits using our Tax Credit Calculator, then simply reduce your quarterly estimated income taxes by that amount.
