In today’s competitive job market, companies are constantly looking for ways to attract top talent. One effective strategy that has gained momentum in recent years is hiring veterans. Not only does this benefit the veterans who are seeking employment after their military service, but it also provides companies with a highly skilled and dedicated workforce. To further incentivize businesses to hire veterans, the government introduced the tax credit for hiring veterans in 2016. This tax credit provides financial benefits to companies that hire eligible veterans, making it a win-win situation for both parties.
**What is the tax credit for hiring veterans 2016?**
The tax credit for hiring veterans 2016 is a federal tax incentive designed to encourage businesses to hire veterans and integrate them into the civilian workforce. It was introduced as part of the Veterans Opportunity to Work (VOW) to Hire Heroes Act of 2011 and later expanded in 2016.
The tax credit allows businesses to claim a certain amount of money as a credit against their federal income tax liability for hiring qualifying veterans. This credit can range from $2,400 to $9,600 per qualified veteran depending on various factors such as length of unemployment, service-related disabilities, and the number of hours worked by the veteran.
It’s important to note that the tax credit for hiring veterans is separate from the Work Opportunity Tax Credit (WOTC), which provides tax incentives for hiring individuals from targeted groups, including veterans. However, the two credits can be combined if a veteran meets the eligibility criteria for both programs.
**Who is eligible for the tax credit?**
To be eligible for the tax credit for hiring veterans, both the employer and the veteran must meet certain criteria. Here are the key requirements:
1. **Employer eligibility**: The employer must be a taxable entity and can include for-profit businesses, tax-exempt organizations, and government entities.
2. **Veteran eligibility**: The veteran must meet the following criteria:
– Have served on active duty in the U.S. Armed Forces for more than 180 days or have been discharged due to a service-related disability.
– Not have been in the active military service for a period of more than 90 days during the 60-day period ending on the hiring date.
– Not have been discharged or released from the military for misconduct.
– Be employed for at least 120 hours during the tax year for which the credit is claimed.
**How does the tax credit work?**
The amount of the tax credit for hiring veterans depends on various factors, including the veteran’s eligibility category and the number of hours worked. Here’s a breakdown of the credit amounts:
1. **Veteran employed for at least 4 weeks but less than 6 months**: The tax credit is 25% of the veteran’s first-year wages up to a maximum of $6,000.
2. **Veteran employed for at least 6 months**: The tax credit is 40% of the veteran’s first-year wages up to a maximum of $6,000.
3. **Veteran with service-connected disability**: If the veteran has a service-connected disability and is hired within one year of leaving the military, the tax credit is 40% of the veteran’s first-year wages up to a maximum of $12,000.
It’s important to note that the credit is nonrefundable, meaning it can only be used to offset the employer’s federal income tax liability. However, any unused credit can be carried forward for up to 20 years.
**How to claim the tax credit?**
To claim the tax credit for hiring veterans, employers must complete and submit IRS Form 5884 with their annual tax return. In addition to the form, employers must also obtain certain documentation from the veteran, including a certification from the state workforce agency or the Department of Veterans Affairs.
It’s crucial for employers to keep accurate records and documentation to substantiate their eligibility for the tax credit. This includes maintaining records of the veteran’s employment start and end dates, the number of hours worked, and any other relevant information.
**Benefits of hiring veterans**
Aside from the financial incentives provided by the tax credit, there are numerous benefits to hiring veterans. Veterans bring a unique set of skills and qualities to the workplace, including:
1. **Leadership and teamwork**: Veterans have experience working in diverse and high-pressure environments, where teamwork and leadership are essential. They can bring these skills to any organization and contribute to its success.
2. **Discipline and work ethic**: Military training instills discipline, punctuality, and a strong work ethic in veterans. Employers often find that veterans are highly motivated, dependable, and willing to go above and beyond to get the job done.
3. **Technical skills**: Many veterans receive specialized training in various technical fields during their military service. This can include areas such as information technology, engineering, logistics, and healthcare. Employers can benefit from these highly sought-after technical skills.
4. **Diversity and inclusion**: Hiring veterans promotes diversity and inclusion in the workplace. Veterans come from different backgrounds and cultures, bringing a fresh perspective and new ideas to the table.
**Frequently Asked Questions**
**Q1: Can the tax credit for hiring veterans be carried back or carried forward?**
No, the tax credit for hiring veterans cannot be carried back to previous tax years. However, any unused credit can be carried forward for up to 20 years to offset future federal income tax liabilities.
**Q2: Can the tax credit be claimed for hiring veterans who are self-employed?**
No, the tax credit for hiring veterans can only be claimed by employers who are taxable entities. Self-employed individuals are not eligible to claim the credit.
**Q3: Can the tax credit be claimed for hiring veterans who are family members?**
Yes, the tax credit can be claimed for hiring veterans who are family members, as long as the employer meets the eligibility criteria and the veteran meets the specified requirements.
**Final Thoughts**
The tax credit for hiring veterans in 2016 is a valuable incentive for businesses looking to diversify their workforce and leverage the unique skills and qualities that veterans bring. By hiring veterans, companies not only contribute to the economic well-being of these individuals but also benefit from their leadership, discipline, technical skills, and commitment to excellence. The tax credit further encourages employers to prioritize the hiring of veterans and recognize the value they bring to the workplace. So, if you’re a business owner or HR professional, consider tapping into this valuable resource and take advantage of the tax credit for hiring veterans in 2016.