Hiring Veterans – a resource for Human Resources Professionals, Hiring Managers, and companies that want to hire and retain talented veterans.
Part 2: Tax Credits for Companies that Hire Veterans
This is the second in a string of posts to help demystify the complex world of veteran employment from the perspective of the employer. In the previous post we detailed the definition of a “Protected Veteran”, which is important for companies that are required to implement an Affirmative Action Plan (AAP) in order to comply with Office of Contract Compliance Program (OFCCP) regulations. In this post, we look at incentives that governments as the state and federal level offer to companies for hiring veterans.
The simplest way for the government to incentivize companies to hire veterans is by providing tax credits to employers. There are a wide variety of tax credits available for companies who employ veterans, and in some cases they can amount to tens of thousands of dollars off of a firm’s tax bill. The list that follows is not all inclusive, but it is a rollup of all of the incentives that I could find. Some are currently unfunded (meaning that they have been funded in years prior but have not yet been funded for 2014), but just because they are unfunded today doesn’t mean that they will be unfunded tomorrow. Most of the programs below are funded, and it is up to the employer to meet the administrative requirements to apply for the credits.
So what are the credits and what veterans are qualified for each credit? Here is a brief description of each incentive along with links to the associated website(s):
In 2011, the Work Opportunity Tax Credit (WOTC) was changed by the VOW to Hire Heroes Act to include qualified veterans as a targeted group. The credits apply to both for profit and non profit organizations, and amount to thousands of dollars per hire – which means that there is no limit to the number of qualified veterans a company can hire and claim for tax credits. Although the VOW act was extended from the end of 2012 to the end of 2013, it has not been renewed since and the tax credits are not currently available but may be again in the future. There are two groups of veterans eligible for credits:
- The Returning Heroes Tax Credit of up to $5,600. This applies to veterans who have been unemployed or who have received Supplemental Nutrition Assistance Program assistance (SNAP, aka Food Stamps) during the past year:
- Short-term Unemployed: 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 insurance or compensation for at least 4 weeks.
- Long-term Unemployed: 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 insurance or compensation for longer than 6 months.
- The Wounded Warriors Tax Credit of up to $9,600. This applies to unemployed veterans who have a disability related to service in the armed forces:
- A credit 40% of the first $12,000 of wages (up to $4,800).
The Heroes Earnings Assistance and Relief Tax Act of 2008 (which had been extended until the end of 2013 and has not yet been renewed), provides incentives for small business.
- The Activated Military Reservist Credit for Small Businesses Tax Credit of up to $4,000.
- The Federal Empowerment Zone Employment Credit of up to $3,000.
Although these federal tax credits are currently expired, they may be renewed with future legislation.
In order to apply for the credits, the employer must follow the directions listed on the Internal Revenue Service (IRS) website.
In addition to the Federal Government, eleven states also offer incentives for hiring veterans. As of July 2014 all of the following state veteran hiring incentives are still available:
Alabama $1000 for small businesses that hire recently deployed and now discharged unemployed Veterans.
Alaska The credit available is $3,000 for the permanent hire of a disabled veteran and $2,000 for the permanent hire of a veteran not disabled. A credit of $1,000 is available for the employment of any veteran in a seasonal position.
California The credit is based on 35% of a new employee’s qualified wages or wages between 150% (or $10 for a Pilot Area) and 350% of minimum wage. The business must qualify for the New Employment Credit (NEC).
Delaware Companies that hire veterans or National Guard members who have served in recent overseas conflicts are eligible for a tax credit is equal to 10% of wages, up to a maximum of $1,500.
Illinois Illinois employers can earn an income tax credit of up to $5,000 annually for hiring veterans of Operation Enduring Freedom, or Operation Iraqi Freedom.
Massachusetts “For-profit” employers in Massachusetts that plan to hire certain low-income or disabled veterans may be eligible for a $4800 tax credit.
New Mexico The Veteran Employment Tax Credit will provide up to $1,000 to businesses each time they hire a veteran who has recently been discharged from the military.
New York Businesses may earn up to $5,000 for hiring a qualified Veteran, and up to $15,000 for hiring one who is disabled between January 1, 2014 and before January 1, 2016.
Utah Utah Veteran Employment Tax Credit provides a tax credit for the first year beginning at $200 per month, not to exceed $2,400 per year and increases the second year to $400 per month, not to exceed $4,800 per year for each veteran hired.
Vermont The State of Vermont now provides a tax credit of $2,000 to employers who hire a veteran with recent military service.
West Virginia The West Virginia Military Incentive Act of 1991 (MIP) offers employers up to $5,000 in tax credits (based on a percentage of the first $5,000 in wages paid after one continuous year of employment) on their West Virginia corporate or personal tax liability for hiring any service-connected disabled veteran, economically-disadvantaged Vietnam-era or Korean conflict veterans, or unemployed active members of the National Guard or Reserves.
Tax credits and incentives change frequently, and are usually directly tied to the state and federal governments’ legislative cycle. Check your state’s veterans agency and workforce development office for new or updated incentives.