As we approach the celebration of our nation’s birth this July, let’s take a moment to reflect on the immense sacrifices and contributions of our service members. When veterans transition from military service to civilian life, they often seek new opportunities in the workforce. Hiring these highly skilled and dedicated individuals is not only a profound way to honor their service but can also significantly benefit your business through the Work Opportunity Tax Credit (WOTC) program. 

The WOTC is a powerful federal incentive designed to encourage employers like you to hire individuals from specific target groups who face barriers to employment, including our nation’s veterans. It’s a true win-win: your business gains a valuable employee, and you receive a substantial tax credit. 

Does Your Veteran Candidate Qualify for WOTC? Understanding the 5 Categories 

The WOTC program includes several specific categories for qualified veterans. Here’s a breakdown of common veteran WOTC target groups: 

A “qualified veteran” is a veteran who is any of the following: 

1. A member of a family receiving assistance under the Supplemental Nutrition Assistance Program (SNAP) (food stamps) for at least a 3-month period during the 15-month period ending on the hiring date 
2. Unemployed for periods of time totaling at least 4 weeks (whether or not consecutive) but less than 6 months in the 1-year period ending on the hiring date 
3. Unemployed for periods of time totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date 
4. Entitled to compensation for a service-connected disability and hired not more than 1 year after being discharged or released from active duty in the U.S. Armed Forces or 
5. Entitled to compensation for a service-connected disability and unemployed for periods of time totaling at least 6 months (whether or not consecutive) in the 1-year period ending on the hiring date 

Calculating Your Potential WOTC Tax Credit 

The maximum tax credit you can claim varies depending on the specific veteran target group and the amount of qualified wages paid in the first year of employment. To qualify for the full credit, the employee generally must work at least 400 hours in the first year. 

Here are some common maximum credit amounts for eligible veterans: 

• Most Veteran Categories: Up to $2,400 (for most veterans, 40% of up to $6,000 in first-year wages). 

• Disabled Veterans (Recently Discharged): Up to $4,800 (40% of up to $12,000 in first-year wages). 

• Unemployed Veterans (6 Months): Up to $5,600 (40% of up to $14,000 in first-year wages). 

Crucial Steps to Claiming Your WOTC 

Claiming the WOTC requires timely action. The Work Opportunity Tax Credit (WOTC) will offer large tax credits for every military veteran you hire. Adhering to federal WOTC requirements is critical: 

1. Pre-Screening is Key: Before a veteran’s first day of work, it’s highly recommended to pre-screen them to determine potential WOTC eligibility. This ensures you can meet the strict federal deadlines. 
2. Submit Form 8850 Timely: You must submit IRS Form 8850, “Pre-Screening Notice and Certification Request for the Work Opportunity Credit,” to your State Workforce Agency1 (SWA) within 28 days of the eligible veteran’s start date. This deadline is strictly enforced and missing it will result in forfeiture of the credit. 
3. Certification: The SWA will review your submission and, if approved, issue a certification. Keep this certification for your records. 
4. Claiming the Credit: Once certified and the employee has met the minimum hours worked (120 hours for a partial credit, 400 hours for the full credit) and wage requirements, you will claim the credit on your federal income tax return using IRS Form 5884, “Work Opportunity Credit,” and then transferring the credit to Form 3800, “General Business Credit.” 

Important Note: WOTC cannot generally be claimed for re-hired employees. The Work Opportunity Tax Credit is currently authorized through December 31, 2025. 

As we look toward Independence Day, we at Tax Credit Group want to extend our deepest gratitude to all the men and women who have courageously served our country. By understanding and utilizing the WOTC program, you can provide valuable employment opportunities to veterans while benefiting your business. The Work Opportunity Tax Credit (WOTC) will offer large tax credits for every military veteran you hire. You can find more details about the WOTC here.