By Robyn Grable, founder, Service to Civilian
As we’ve just celebrated the 242nd birthday of the United States and the freedom that comes with that, we must take a moment to set down our hot dogs and apple pie and thank those who have ensured that freedom. Military servicewomen and servicemen are selfless. None of them raised their right hands and swore to protect and defend this country thinking, “What’s in it for me?” They raised their hands to serve a higher purpose. In today’s military, less than 1 percent of the U.S. population steps forward, compared with 12 percent during World War II, according to the New York Times.
So what’s in it for you as an employer if you hire a veteran? In addition to the multitude of skills, dedication, and work ethics each veteran brings to your organization, your company may qualify for several tax credits or incentive programs.
Federal WOTC (Work Opportunity Tax Credit)
- Veterans who have been unemployed for a total of at least four weeks or at least six months during the one-year period prior to the date of hire (the incentive amount varies depending on the length of unemployment).
- Veterans entitled to compensation for a service-related disability hired within one year of the date of discharge or release from active duty.
WOTC can reduce an employer’s federal income tax liability by as much as $9,600 per veteran hired.
- Short-term unemployed: A credit of 40 percent of the first $6,000 of wages (up to $2,400) for employers who hire veterans who have been in receipt of unemployment insurance or compensation for at least four weeks or who have received assistance from a supplemental nutrition assistance program under the Food and Nutrition Act of 2008 for at least a three-month period during the 15-month period ending on the hiring date.
- Long-term unemployed: A credit of 40 percent of the first $14,000 of wages (up to $5,600) for employers who hire veterans who have been in receipt of unemployment insurance or compensation for longer than six months (whether or not consecutive) in the one-year period ending on the hiring date.
Wounded Warrior Tax Credit
- Veterans with service-connected disabilities hired within one year of being discharged from the military: The credit is 40 percent of the first $12,000 of wages (up to $4,800).
- Long-term unemployed veterans with service-connected disabilities: a credit of 40 percent 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 insurance or compensation for longer than six months.
Differential Wage Payment Credit
- A credit of up to $4,000 for employers who pay Reserve and National Guard employees while they are away on active duty for more than 30 days and have been employed for more than 90 days.
- Formerly available only to small businesses in 2015, now permanently available to all employers.
The credits are based on the amount of wages paid to an eligible veteran in the first year of employment. The maximum tax credit is based on a set percentage of maximum first-year wages, which is fixed by law, and the number of hours worked. For example, for veterans, the basic percentage of first-year wages is 25 percent for those who worked at least 120 hours but fewer than 400 hours; it is 40 percent for those who worked at least 400 hours.
The maximum credit for a veteran working at least 400 hours is:
- Service-related disability and unemployed at least six months in the year ending in the hiring year: $9,600 ($24,000 in wages times 40 percent).
- Service-related disability and hired within one year of discharge or release from active duty: $4,800 ($12,000 in wages times 40 percent).
- Unemployed at least six months: $5,600 ($14,000 in wages times 40 percent).
- Unemployed at least four weeks: $2,400 ($6,000 in wages times 40 percent).
There is no limit on the number of eligible employees you can hire for the credit. For example, if you hire three veterans with service-related disabilities who are unemployed at least six months, your credit is $28,800 (three times $9,600).
The WOTC is set to run through 2019, and you can take the credit year after year as you continue to hire veterans. Thus, even if you take a tax credit for hiring a veteran in 2018, you can do so again next year.
To take the tax credit, you must submit the proper IRS forms, which are easily available on the IRS or Veterans Affairs websites.
Special Employer Incentives for hiring veterans
The Special Employer Incentives program provides assistance to employers who hire veterans. The SEI program connects qualified veterans with a specific role at your organization. Veterans who successfully complete the hiring program are expected to stay on at your organization. With this program, you can hire a qualified trainee at an apprenticeship wage. This program is offered through Vocational Rehab. See https://www.benefits.va.gov/VOCREHAB/docs/SpecialEmployerIncentive.pdf for additional information.