A new tax law signed late in 2011, the VOW to Hire Heroes Act, provides enhanced tax credits to employers that hire military veterans.
Strategy: Adjust your hiring policies to accommodate vets. The changes could be worth thousands of dollars in tax savings to your company.
Technically, the new law amends the rules for the Work Opportunity Tax Credit (WOTC). The WOTC was scheduled to expire after 2011, although it might be extended retroactively. The new law changes are effective as of Nov. 21, 2011, and expire on Dec. 31, 2012.
Here’s the whole story: With the WOTC, employers could generally claim a maximum tax credit of $2,400 for hiring a worker from one of several “target” groups that are economically disadvantaged, including qualified veterans. The basic credit is equal to 40% of the first $6,000 of wages paid to a qualified new hire. Also, a maximum credit of $4,800 was available for veterans with a service-connected disability. And, for 2009 and 2010 only, unemployed veterans were added to the list of target groups eligible for the $2,400 credit.
Now the new law creates a maximum tax credit of:
- $2,400 for hiring veterans who have been unemployed at least one month
- $5,600 for hiring veterans who have been unemployed at least six months
- $9,600 for hiring unemployed veterans with a service-connected disability.
In addition, the new law expands several programs designed to help returning veterans seek work. Education and training will be provided by the U.S. Department of Labor.
The new jobs credit was initially included in a bigger jobs package proposed by the Obama administration.
Other parts of the proposed jobs bill have stalled in Congress.
Tip: A separate provision of the new law repeals a controversial withholding requirement for government units (see box below).