If you hire workers from specific targeted groups, your business can claim a tax credit for a portion of their wages. The amount of credit varies with the group the new employee is part of. By claiming the credit, your firm reduces its out-of-pocket costs. And you'll be helping workers who've faced challenges get back on a payroll.
Among small-business federal government tax credits, the Work Opportunity Tax Credit aims to help veterans and other groups who've faced barriers to employment get back into the workforce. The credits offset some of your company's tax or Social Security liability.
Limits are placed on the amount of small-business hiring credits you receive per employee, but not on the number of employees you hire who are eligible for credits. Every staff member qualified entitles your business to a separate tax credit.
Let's look at several types of small-business hiring credits.
WOTC for veterans. By hiring veterans who've been injured or disabled in the line of duty, your business can receive up to $9,600 in credits. For noninjured service members, your firm can see credits of $2,400.
Other employee categories. The government also may give you tax breaks if you employ any of the following. These nonmilitary hires garner tax credits of up to 40% of the eligible first-year wages, up to a maximum of $6,000 based on hours worked.
Summer youth employees, ages 16 to 17. This tax break is aimed at businesses that need summer employees. The employees should reside in an EZ or enterprise or renewal community. The government grants credits of 40% of first-year wages, up to certain limits.
Long-term family assistance recipients. The new hire must be a member of a family that has received assistance under an IV-A program for at least 18 months prior to the hiring date; started IV-A benefits after 1997 and received them for at least 18 months, but hasn't collected the benefit for more than two years since the last 18-month period of collection; or ceased to be eligible under a federal or state IV-A assistance program within two years of the hiring date because the time limit for benefits to be paid was reached. The credit can run from 40% to 50% of wages in the first two years.
Other Small-Business Credits
As with many tax breaks, these come with a lot of limits, conditions and exceptions, so be sure to speak with a professional to see which of these are applicable to you and under what circumstances.
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