There are many positive considerations for employers hiring veteran talent. US military veterans acquire invaluable hard and soft skills during their terms of service. They are comfortable with managing diverse teams of individuals with varied backgrounds and skill sets. They are adept at leadership roles and take pride in initiative when it counts, to say nothing of the dedication, commitment, and attention to detail that they bring to their roles. One key benefit to employers of hiring veterans that often gets overlooked is that it can lead to significant tax credits. That is something this blog attempts to examine more closely.
Tax Credits for Employers Who Hire Veterans
The Work Opportunity Tax Credit is just one of the incentives to hire an eligible veteran. Even employers who are otherwise tax-exempt can take advantage of the WOTC. There are several other tax breaks to consider as well, such as the RHTC or Returning Heroes Tax Credit as well as the Wounded Warriors Tax Credit.
You may be eligible for the Returning Heroes Tax Credit if you employ previously unemployed veterans. The tax incentives under this credit can reach up to $5,600 per year. On top of that, hiring an unemployed veteran with a service-related disability may make you eligible to receive the WWTC incentive. This doubles the tax credit that you get under the WOTC. To simplify matters, let’s examine these incentives in two broad categories, the tax credits relating to unemployment, and the ones relating to service-connected disabilities.
Tax Credits for Hiring Unemployed Veterans
For the ease of our discussion, there are three distinct types of unemployment in the context of veterans. A qualified long-term unemployed veteran is one that began work at any point between January 2016 to December 2019. To be eligible for the tax credit, the veteran must be employed for at least 27 consecutive weeks. The veteran must also have been receiving unemployment benefits prior to their hiring. WOTC hires that routinely work at least 120 hours a month bring tax credits of 25% of the first $6,000 of wages for the first year. The tax credit is capped at $1,500.
Short-term unemployed veterans have to have spent at least 4 weeks receiving unemployment compensation from the State or Federal government. Hiring these workers makes you eligible to claim 40% of the first $6,000 of their wages as a tax credit. This incentive has a maximum ceiling of $2,400.
Finally, hiring veterans after long-term unemployment can make you eligible to claim 40% of the first $14,000 as a tax credit. However, to qualify for a long-term unemployment tax credit, the veteran you hire must have received unemployment compensation for more than a 6-month period.
Tax Credits for Hiring Veterans with Service-Related Disabilities
For hiring veterans with disabilities as a limiting consequence of their service, employers have a sizeable tax incentive. If hired one year after their discharge from the US military, the WOTC incentive applies. But its ceiling has been raised to 40% of the first $12000 of wages, taking the credit up to $4,800.
Changes to the WWTC program have incentivized hiring long-term unemployed veterans who have a disability connected to their military service. Employers can claim a sizeable tax credit $9,600 or 40% of the first 24,000 of wages. However, to be eligible for the credit, the veteran must have been receiving State or Federal unemployment benefits for at least six months. The credit is capped at $6,420 for organizations exempt from tax.
The IRS also allows several tax-exempt entities to avail the Work Opportunity Tax Credit and hire veterans that make them eligible to file for the incentive. These organizations receive a credit against the Social Security taxes they pay for such veterans.