Tax Benefits of Hiring Veterans
By Ryan Elblein, Senior, Tax & Business
Our nation’s veterans can provide businesses with various benefits, from leadership skills to work ethic and attention to detail. However, hiring veterans can also provide businesses with significant tax benefits through the Work Opportunity Tax Credit (WOTC).
The Work Opportunity Tax Credit is available for wages paid by employers who hire individuals from certain targeted groups, one of which is veterans. Generally, the credit, a dollar-for-dollar offset against an employer’s income tax, is 40 percent of the first $6,000 of qualified wages. For certain qualified veterans, however, the qualified wage limit may be higher, as follows:
- $12,000 for a qualified veteran who is entitled to compensation for a service-connected disability and who has been hired no more than one year after being discharged from active duty.
- $14,000 for a qualified veteran who has been unemployed for an aggregate total of at least six months within the last one-year period ending on the date of hire.
- $24,000 for a qualified veteran who is entitled to compensation for a service-connected disability and who has been unemployed for an aggregate total of at least six months within the last one-year period ending on the date of hire.
In order to receive the Work Opportunity Tax Credit, the employer the veteran must complete IRS Form 8850 and submit it, along with any other state or federal forms that may be required, to the authorized local agency in the employer’s state, within 28 days of starting employment. Form 8850 is used for pre-screening employees and to request that the local agency certify the employee as part of a targeted group. (The employee will also need to provide evidence to the employer that he/she is a discharged veteran, and that proof will need to be submitted to the agency as well).
The Work Opportunity Tax Credit allows employers to fulfill their hiring needs while also providing employment opportunities for veterans and decreasing their tax liability.