By hiring veterans, you don't just gain access to top talent with wealthy skill sets — you can also get significant tax breaks from the government. Whether you are planning to hire a veteran or already have several on your team, studying tax credit options today can help you capitalize on the opportunities.
Working with the government requires a special approach to hiring talent. Besides staying compliant with various regulations, working with top specialists can help companies land big contracts and maintain a stellar reputation.
By hiring veterans, a government contractor can reap various benefits, such as improving company culture, filling employment gaps, gaining access to top talent with valuable experience, and receive tax credits.
Veteran tax credits for employers are designed as an incentive to hire qualified veterans. Understanding how they work can help your company reap financial benefits while staying compliant with federal requirements.
What Are Veteran Tax Credits for Employers?
If you hire veterans for your GovCon projects, you can take advantage of a variety of tax credits available through the Department of Labor Work Opportunity Tax Credit (WOTC) program. This program is designed to incentivize employers to hire from employee groups that have historically faced significant barriers to employment. The program includes Veterans, Disabled Veterans, and other non-veteran groups.
The amount of tax credits available varies by target group, but for veteran employees, can reach $9,600 per veteran hired. According to the Department of Labor, companies claim about $1 billion in work opportunity tax credits annually.
The Returning Heroes Tax Credit
The Returning Heroes Tax Credit is part of the WOTC program. It works for two groups of veterans:
- Unemployed for a short term — if you hire a veteran who has a gap of employment of at least four weeks, you can get a tax credit of 40% on the first $6,000 of wages. Maximum — $2,400.
- Unemployed for a long term — if you hire a veteran who has a gap of employment of more than six months, you can get a tax credit of 40% on the first $14,000 of wages. Maximum — $5,600.
Wounded Warriors Tax Credit
Another part of the WOTC program is the Wounded Warriors Tax Credit. This credit works for the following groups of veteran employees:
- Veterans with service-related disabilities — if you hire a veteran with service-related disabilities within one year of being discharged from the military, you can get a credit of 40% of the first $12,000 of wages. The maximum is $4,800.
- Long-term unemployed veterans with service-related disabilities — if you hire veterans with service-related disabilities who have been receiving unemployment insurance longer than six months, you can get a credit of 40% of the first $24,000 of wages. The maximum is $9,600.
Non-Veteran Target Groups
- Long-term family assistance recipients
- Qualified long-term unemployment recipients
- Food stamp recipients
- Summer youth employee (in Empowerment Zones)
- TANF recipients (long-term temporary assistance for needy families)
- SSI recipients
Important: For tax purposes, WOTC is considered a general business credit. If the total general business credits exceed the tax liability for the current year, they can be carried back or forward.
How to Take Advantage of Veteran Tax Credits
Like most government programs, the DOL WOTC program is designed with requirements, deadlines, and paperwork.
To take full advantage of veteran tax credits, all you need to do is make sure the veterans you already hired or plan to hire are qualified.
GovConPay is designed to simplify the talent acquisition process. It can also assist with hiring military veterans through the comprehensive applicant tracking and recruiting system.
This federal tax credit program is authorized until December 31, 2025.
Important: Veterans who are related to the business owner don't qualify.
With GovConPay's acquisition and reporting tools, you can simplify the veteran hiring process and make sure you stay compliant with federal requirements while enjoying valuable tax credits. And our partnerships with VTC-Veteran Tax Credits can facilitate the process to ensure compliance and maximum benefits.
If you'd like to learn more about veteran tax credits for employers, please contact our team at any convenient time.