How Hiring Military Veterans Helps Your Company Save Money – Part 4: Tax Credits

The federal government encourages employers to hire military veterans by providing a tax credit to organizations that employ certain categories of veterans. This incentive is called the Work Opportunity Tax Credit (WOTC). More details are available in IRS Form 5884.

There are three categories of veterans who, if hired by your company, would entitle your organization to receive the WOTC. A maximum tax credit of up to $2,400 is available to companies that hire:

  1. A veteran who was referred to your company by the Department of Veterans Affairs as part of a vocational rehabilitation program, or
  2. A veteran who is a member of a family that received food stamps for at least a 3-month period in the past 15 months
  3. A veteran with a service-connected disability who, within the last year, was either a) discharged or released from active duty in the U.S. Armed Forces, or b) unemployed for a period or periods totaling at least 6 months. This tax credit rises to a maximum of $4,800.

“Service-connected disability” sounds a bit scary and intimidating to those unfamiliar with the term. However, what it really means is that the Department of Veterans Affairs (VA) has evaluated the veteran and has determined that he or she is considered disabled by an injury or illness that was incurred or aggravated during active military service. Disability levels are rated from 10% up to 100%.

An example of a service-connected disability might be an infantry soldier who spent his career parachuting out of perfectly good airplanes and as a result of those numerous hard landings has injured his back or torn up some ligaments in his knees.

To the casual observer, this veteran looks, acts, and walks no different than any other person. But the VA may have evaluated him and determined that he is 30% disabled due to injuries incurred because of his service. Other disabilities could be hearing loss due to working around generators, lower back injuries from riding in cramped armored vehicles, even high blood pressure from working in a very stressful environment. Of course, it also applies to more obvious injuries such as loss of a limb, or eyesight, or burns.

The IRS also provides a tax credit (via Form 8826) of up to $5,000 to small businesses (defined as having gross receipts of less than $1 million OR no more than 30 full-time employees) to cover expenditures related to making your workplace more accessible to a disabled employee. Eligible expenses could be things like installing special readers for those with visual impairments, installing a height adjustable desk to make it wheelchair accessible or contracting for a sign language interpreter to accompany an employee with hearing loss to attend training.

Many states also offer an employer tax credit incentive for hiring veterans with a service-connected disability. For example, Pennsylvania has an Employment Incentive Payment (EIP) program for companies who hire veterans who are completing rehabilitative services through the VA. An employee must work one year in order to qualify the employer for the maximum first year credit of $2,700. An employer can earn a tax credit of up to 30 percent of the first $9,000 in qualified first year wages; 20 percent for year two; and 10 percent for year three. Also, if the employer provides or pays for child care or transportation services for each new employee, up to $1,800 of addition EIP tax credits are available over the three-year period.

So, just think how much money your company could save if it made the effort to hire even 10 veterans next year from one of those eligible categories. Now, think bigger – 20, 50, 100 veterans!

If you’d like more information about hiring disabled military veterans I encourage you to attend my web seminar entitled “Hiring Disabled Military Veterans”. The schedule for all of my web seminars can be found by clicking this link.