In addition to strong skill sets and personal characteristics, many veterans can bring an added financial benefit to their employer through the Work Opportunity Tax Credit (or WOTC).
Employers naturally have questions about how veterans qualify. How long must a veteran have served? What if they have a service-connected disability? What are the specific tax credit amounts?
Which Veterans Are Eligible?
To be considered for WOTC, a veteran first must have served more than 180 days of active duty (not including training) – unless, of course, they were discharged sooner because of a service-connected disability. Additionally, their last period of “extended active duty” must have ended at least 61 days prior to their date of hire.
These are the two threshold considerations and most veterans you hire will pass them both with colors flying.
They must then also match at least one of the WOTC-eligibility criteria shown in the table below. The maximum amounts of tax credit your business can earn are listed on the right. Please notice that the amount varies, depending on why a veteran qualifies for WOTC.
Eligible-Veteran Criteria
Tax Credit
Member of a family that received SNAP benefits for at least 3 of the past 15 months
$2,400
Unemployed for at least 4 weeks (any 4) during the past year
$2,400
Discharged within the past year & entitled to compensation for a service-connected disability
$4,800
Unemployed for at least 6 months(and 6) during the past year
$5,600
$9,600
These tax credits amounts are per eligible employee and there is NO LIMIT to the number of WOTC-qualified employees you can hire. If your business can sustain 5, 10 or 50 new veterans annually, all the better for both you and them!
Keep in mind that non-veterans also qualify for WOTC. So, if a veteran’s circumstances do not match any of the veteran-specific criteria listed above, they might still qualify under another WOTC target group. You can read about all of the target groups here.
How The Tax Credits Add Up
This part gets a little technical. WOTC tax credit amounts are equal to a percentage (40%) of the wages you pay the veteran during his or her first year of work. The amount of wage you can use in the calculation is capped at a maximum amount -- and that amount varies according to why a veteran qualifies. This is why the tax credit amounts listed in the table above range between $2,400 and $9,600.
A few other details can also affect the tax credit amount. If a veteran works less than 400 hours before leaving your company, the percentage used to calculate the tax credit must be reduced from 40% to 25%. If the veteran works less than 120 hours, it’s reduced to 0%. That means no tax credit is available if an employee leaves or is terminated before they’ve worked at least 120 hours.
Walk the Line . . . But Make It Easy
Anything having to do with the military or federal tax code will have strict rules to follow, especially when you’re going to reduce your federal tax bill. To qualify for WOTC, new hires must provide eligibility information on or before the day you offer them a job. There are forms to complete, applications to submit and certifications that you need. The rules allow just 28 days to submit employee application to your state workforce agency.
It sounds difficult. It can be.
At WOTC Planet, our job is to make it easy. If fact, we do it all FOR you!
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