During this past year, on November 21, 2011, President Obama signed into law “Returning Heroes & Wounded Warrior” tax credits. This extended and enhanced tax credit for employers is intended to help our returning war veterans with assimilation into our current job market.
Effective January 1, 2012, a series of executive actions have been enacted intended to help veterans find employment. It is important to note that these new acts expand the definition of “qualified veteran,” increases the employer’s tax credit amount over previous levels, and extends the availability of hiring credits to tax-exempt employers. The work opportunity tax credits for employers will apply to employers that add U.S. veterans to their payroll any time before January 1, 2013.
These extended and enhanced tax credits are called the “Returning Heroes & Wounded Warrior” tax credits. The following are the two primary tax credit incentive categories:
- Short-term unemployed: A new credit of 40% of the first $6,000 of wages (up to $2,400) for employers who hire veterans who have been unemployed for at least 4 weeks.
- Long-term unemployed: A new credit of 40% for the first $14,000 of wages (up to a maximum of $5,600) for employers who hire veterans who have been unemployed longer than 6 months.
The length of unemployment in each case is determined on an aggregate basis looking back one year prior to the date of hire. In other words, it is not necessary for the unemployment period to immediately precede the veteran’s hire date. These new services became effective January 1, 2012. As a hiring employer, businesses can claim a significant tax credit if they add returning war veterans to their payroll before January 1, 2013. The “Wounded Warrior” tax credit, offers enhanced benefits to employers in that the tax credit will double the existing tax credit levels for long-term unemployed veterans with service-related disabilities. There is now a new tax credit of 40% of the first $24,000 of wages (up to a maximum of $9,600) for companies that hire veterans with service-related disabilities who have been unemployed for longer than six months.
While reducing the unemployment rate for all Americans should be a top priority of Congress, the passing of The Returning Heroes & Wounded Warriors Work Opportunity tax credit legislation provides significant additional incentives to employers to hire returning veterans, thereby supporting our troops at home as they seek to enter the civilian workforce.