Hiring tax credits are designed to incentivize employers to help unemployed and underemployed workers find appropriate jobs. By hiring employees covered under one of these types of tax credits, you can help reduce your company's annual tax obligation. In fact, businesses that offer employment to candidates in these categories may qualify for annual tax credits worth several thousands of dollars per employee.
The next time you're in the market for a new job candidate, consider participating in one of the following programs:
1. VOW to Hire Heroes Extension Act
The VOW to Hire Heroes Extension Act, first issued in 2011, has been extended through Dec. 31, 2016. This particular act offers tax credits ranging from $2,400 to as much as $9,600 per hired veteran employee. The specific value is determined based on how long the veteran had previously been unemployed: the longer the period of unemployment, the higher the tax credit.
2. Work Opportunity Tax Credit (WOTC)
The WOTC federal program offers tax relief to businesses that hire workers in particular target groups, including:
- Unemployed and disabled vets
- Recipients of Temporary Assistance for Needy Families (TANF)
- Food stamp (SNAP) recipients
- Residents of Empowerment Zones or Rural Renewal counties, which are considered economically depressed geographic regions
- Vocational rehabilitation-referred workers
- Recipients of supplemental security income
- Summer youth employees who live in Empowerment Zones
The size of the tax credit available to a business varies depending on the qualifying group to which a worker belongs and the number of hours he or she works in the first year. According to the United States Department of Labor, the general tax credit earned ranges somewhere between 25 to 40 percent of the employee's first-year wages. In order to qualify for this tax credit, the employee in question must have been hired between Dec. 31, 2014 and Jan. 1, 2020.
3. State Hiring Incentives
Several states offer their own unique selection of hiring tax credits to help reduce a company's state tax liability. The amount of the credit varies by state and typically takes into account the number of hours the employee works per week, or per year, and whether the worker has been unemployed. According to Orion International, these statewide programs include the Hire-A-Vet credit in New York and the Oklahoma Quality Jobs Program.
Although each program requires you to complete forms to document your newest hire, the time invested in filling out this paperwork could yield reduced tax liability this year. Before you make your next hiring decision, consider whether any hiring tax credit programs would make sense for your business.
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