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Employers Now Can Now Receive Expanded Tax Credits for Hiring Veterans

On 21 November, the President signed new legislation, a portion of which continued and expanded tax breaks to employers who hire veterans.  H.R. 674 became Public Law 112-56 and Title II within it, the section which applies to veterans, is known as the “VOW to Hire Heroes Act of 2011.”

While the bill directs certain federal departments to reform or improve veterans retraining and placement,  includes improvements to  Uniformed Services Employment and Reemployment Rights Act (USERRA), and directs improvements in the somewhat infamous Transition Assistance Program (TAP) — among  other items of interest  — what seems to be grabbing the attention has been a small section on new tax credits found under “Other Matters.”

In a previous Recovery Act,  employers who hired certain unemployed veterans were eligible for a tax credit of up to 40 percent of the first $6,000 of wages, for a maximum credit of $2,400. However, this credit expired at the end of 2010. Under the new law,  the Internal Revenue Code of 1986 (26 U.S.C. 51 and 52),  two new tax credits have been put in place  in addition to ostensibly simplifying certification:

1.  The Returning Heroes Tax Credit which provides an incentive for businesses to hire unemployed veterans as follows  [Despite the corny name, it does not matter if they are veterans of the current war.]:

  • For the  short-term unemployed, a credit of 40 percent of the first $6,000 of wages (up to $2,400) for employers who hire veterans who have been unemployed at least 4 weeks.
  • For the  long-term unemployed, a credit of 40 percent of the first $14,000 of wages (up to $5,600) for employers who hire veterans who have been unemployed longer than 6 months.

2.  The Wounded Warrior Tax Credit which will double the existing tax credit for long-term unemployed veterans with service-connected disabilities.

  • For the  short-term unemployed and disabled, maintains the existing Work Opportunity Tax Credit for veterans with service-connected disabilities (currently the maximum is $4,800).
  • For the long-term unemployed and disabled, adds a new credit of 40 percent of the first $24,000 of wages (up to $9,600) for firms that hire veterans with service-connected disabilities who have been unemployed longer than 6 months.

The Act also  allows tax-exempt organizations to claim the lesser of the amount of the work opportunity tax credit for hiring veterans or the amount of the payroll taxes paid by such organizations during the calendar year, extending  through 2012 such credit with respect to such veterans.  Finally, it provides a credit against payroll taxes for their employing such veterans.

For more details and other provisions, go to:

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RJH
As of 30 November 2011
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