Tax Credits for Employers
In addition to bringing back a returning veteran employee or hiring a skilled and disciplined new veteran employee, employers who hire veterans may qualify for tax credits from the government. Employers who hire veterans who have consistently faced significant barriers to employment may qualify for the Work Opportunity Tax Credit (WOTC). The tax benefits range from $1,200 to $9,600, depending on the hire.
Furthermore, the Returning Heroes Tax Credit and the Wounded Warrior Tax Credit have both been extended through 2019, and some states also offer tax incentives for employers that hire veterans.
So, bottom line, returning veterans make great employees, and there are many reasons to recruit and retain them—including these, collected by Small Business Trends:
- Veterans are goal-oriented
- Veterans are trained leaders
- Veterans take responsibility seriously
- Veterans know how to make decisions
- Veterans are loyal and know how to defend
- Veterans speak their minds
- Veterans work well independently
- Veterans have a great work ethic
- Veterans can help you organize
- Veterans receive education assistance
- Veterans know technology
- Veterans understand globalization
- Veterans understand health and safety
- Hiring a veteran saves you money
- Hiring a veteran means tax incentives
- Veterans don’t give up
How to Receive Tax Credits for Hiring Veterans
Businesses that hire eligible unemployed veterans can take advantage of a Work Opportunity Tax Credit (WOTC). (This credit is also available to certain tax-exempt organizations.) After recent changes, The Returning Heroes Tax Credit now provides incentives of up to $5,600 for hiring unemployed veterans, and the Wounded Warriors Tax Credit doubles the existing Work Opportunity Tax Credit for long-term unemployed veterans with service-connected disabilities, to up to $9,600.
Here are the various veteran-related tax credits your company could qualify for:
Unemployment Tax Credits:
Wounded Warrior Tax Credits:
- Qualified Long-term Unemployment: This is a credit for new hires that begin work on or after January 1, 2016 through December 31, 2019, during which the individual is employed no less than 27 consecutive weeks, and includes a period in which the individual was receiving unemployment compensation under State or Federal law. For WOTC-certified new hires working at least 120 hours, employers can claim 25% of the first year wages paid up to $6,000, for a maximum income tax credit of up to $1,500. For WOTC-certified new hires working 400 hours or more, employers can claim 40% of the first year wages up to $6,000, for a maximum income tax credit of up to $2,400.
- Short-term Unemployment: A credit of 40% of the first $6,000 of wages (up to $2,400) for employers who hire veterans who have been in receipt of unemployment compensation for at least 4 weeks.
- Long-term Unemployment: A credit of 40% of the first $14,000 of wages (up to $5,600) for employers who hire veterans who have been in receipt of unemployment compensation for longer than 6 months.
- Veterans with Services-Connected Disabilities: Maintains the existing Work Opportunity Tax Credit for veterans with service-connected disabilities hired within one year of being discharged from the military. The credit is 40% of the first $12,000 of wages (up to $4,800).
- Long-Term Unemployed Veterans with Services-Connected Disabilities: A new credit of 40% of the first $24,000 of wages (up to $9,600) for firms that hire veterans with service-connected disabilities who have been in receipt of unemployment compensation for longer than 6 months. The credit can be as high as $9,600 per veteran for for-profit employers or up to $6,240 for tax-exempt organizations.
- Certain tax-exempt organizations can take advantage of WOTC by hiring eligible veterans and receiving a credit against the employer's share of Social Security taxes.