Each year in November, the nation celebrates all the brave men and women
who served our great country – living and dead – on Veterans
Day. We wanted to take a moment to not only thank our veterans for defending
our freedom and for making free enterprise possible, but to reflect on
some of the benefits of hiring veterans.
Many business owners have discovered that veterans can make excellent employees.
They are trustworthy, hardworking, loyal, responsible, and eager to learn
– all attributes that make the best employees. These characteristics
make veterans attractive candidates, but the tax laws make hiring veterans
even more appealing.
As a business owner, did you know that the tax laws reward employers for
hiring veterans in certain groups? Under the Work Opportunity Tax Credit
Act (WOTC), small business owners may qualify for the work opportunity
tax credit if they hire veterans in one of these categories:
- The veteran has a service-related disability
- The veteran has been unemployed
- The veteran is receiving SNAP benefits (food stamps)
Even if a veteran does not fall into one of the above categories, he or
she may qualify as a member of another targeted group. If the veteran
falls into another specified category, you still may be able to take advantage
of the tax credit.
How does the tax credit work?
Under the WOTC, if you hire a qualifying veteran, your tax bill would be
reduced dollar-for-dollar. Under the program, each dollar of WOTC saves
you one dollar in taxes. The tax credit applies to the first year of wages
paid to an eligible veteran, and the maximum tax credit is fixed by law.
For example, if the veteran worked between 120 and 399 hours, the basic
percentage for their first year of wages would be 25%. If the veteran
worked 400 or more hours, the tax credit is 40% of the veteran’s
first year of wages.
Maximum tax credit allowed for a veteran that worked 400 or more hours:
- If the veteran was unemployed or suffered a service-related disability
for at last 6 months in the year the veteran was hired: $9,600.
- If the veteran has a service-related disability and it’s been 1 year
since their release or discharge from active duty: $4,800.
- If the veteran has been unemployed for at least 6 months: $5,600.
- If the veteran has been unemployed for at least 4 weeks: $2,400.
- If the veteran has been receiving SNAP benefits: $2,400.
If you enjoy hiring veterans, the good news is that there is no limit on the
number of eligible veterans you can hire for the tax credit. If you were to hire
just 3 veterans with a service-related disability, who were out of work
for at least 6 months, your tax credit would be $28,800.
Note: if a veteran employee is eligible for the tax credit, you must submit
IRS Form 8850 to Illinois’ workforce agency within 28 days of the
veteran’s first day of employment.
Consider the WOTC When Hiring
When you are expanding your workforce, you may want to keep the WOTC in
mind. While the WOTC won’t be the primary force behind your hiring
decisions, it may help make a selction faster when it is between two job
Do you need legal representation in a
business law matter?
Contact Rifkind Patrick LLC to speak with a Chicago business law attorney!