How to Leverage Tax Credits for Employing Veterans

16 February 2026

Hiring veterans isn’t just the right thing to do—it’s also a smart move for your business. If you run a company, big or small, there’s a real win-win opportunity here: you help someone who’s served our country transition into civilian work life, and your business gets access to tax credits that can seriously reduce your bottom line.

So, what’s the deal with these tax incentives, and how can you make the most of them? Let’s walk through the ins and outs together so that by the end of this article, you’ll know exactly how to take advantage of them.

Why Hire Veterans in the First Place?

Before we even get into the juicy financial benefits, let’s touch on the human side of this. Veterans bring a boatload of skills that businesses crave: discipline, leadership, adaptability, and a strong work ethic. These are folks trained to perform under pressure and work efficiently in teams. Sounds like the kind of employee you want, right?

Now pair that top-tier talent with federal and state tax credits, and you’ve got a recipe for business growth and good karma.

What Are Tax Credits for Hiring Veterans?

Tax credits are basically the government’s way of giving you a financial high-five for doing something beneficial for society. When it comes to hiring veterans, there are programs specifically designed to reward employers who provide opportunities to those who served.

Unlike tax deductions, which just reduce how much of your income is taxable, tax credits reduce your tax bill dollar-for-dollar. That’s real money back in your pocket. These are the main ones we’re going to talk about:

- Work Opportunity Tax Credit (WOTC)
- State-specific veteran hiring programs
- Returning Heroes Tax Credit (expired but worth a mention)
- Wounded Warrior Tax Credit

Let's break them down.

The Work Opportunity Tax Credit (WOTC)

The WOTC is the big kahuna when it comes to veteran hiring benefits. It's a federal tax credit available to employers who hire individuals from specific target groups that have consistently faced significant barriers to employment—veterans included.

How Much Can You Get?

The amount varies, but you can receive up to $9,600 per eligible veteran hired, depending on several factors like:

- The number of hours the veteran works
- The veteran's length of unemployment before hiring
- Whether the veteran has a service-connected disability

Here's the general breakdown:

| Veteran Category | Maximum Credit |
|------------------|----------------|
| Short-term unemployed (at least 4 weeks) | $2,400 |
| Long-term unemployed (at least 6 months) | $5,600 |
| Service-connected disability + unemployed <6 months | $4,800 |
| Service-connected disability + unemployed >6 months | $9,600 |

Not a bad incentive, right?

How to Qualify

To qualify for the WOTC, veterans must meet at least one of the following:

- Have a service-connected disability
- Be unemployed for at least four weeks (but less than six months) during the year prior to hiring
- Be unemployed for six months or more
- Be a recipient of SNAP (food stamps)

You’ll need to act fast, though. You must file IRS Form 8850 with your state workforce agency within 28 days of the new hire’s start date.

State-Specific Veteran Hiring Tax Credits

In addition to the WOTC, many states offer their own incentives. For example:

- California has the California Competes Tax Credit
- Texas offers various Veterans’ Employment Services
- New York boasts the Hire-A-Vet Credit

These credits vary in terms of eligibility and amount, but they can often be stacked on top of the WOTC, which basically sweetens the pot.

To find out what’s available in your state, check your state’s Department of Labor or Department of Veterans Affairs website.

The Former Returning Heroes and Wounded Warrior Tax Credits

Okay, quick sidebar. The Returning Heroes and Wounded Warrior Tax Credits used to be in play, but they were folded into the WOTC after 2013. Still, they laid the groundwork for expanded veteran hiring incentives, and their legacy continues in today's programs.

So while you can’t apply for those specific credits anymore, the WOTC effectively replaced and expanded them. The bottom line? These benefits are still very much alive—just under a different label.

Step-by-Step Guide: How to Claim Tax Credits for Hiring Veterans

So now that you know what’s out there, let’s talk about how to actually get your hands on those sweet tax credits.

Step 1: Identify Eligible Veterans During Hiring

Start by asking new hires to voluntarily provide information using the IRS Form 8850 (Pre-Screening Notice and Certification Request).

It’s important to do this on or before the day you offer the job, and not later than 28 days after the start date. Timing really matters here.

Step 2: Submit the Paperwork

Send Form 8850 to your State Workforce Agency (SWA) within 28 days of hiring. Along with that, you’ll likely need to submit:

- ETA Form 9061 (Individual Characteristics Form) or
- ETA Form 9062 (Conditional Certification if the veteran has already been pre-certified by a workforce agency)

Double-check requirements because some states may ask for additional documentation.

Step 3: Certification Approval

Once the state verifies that your hire qualifies, you’ll receive a certification. Keep this in your records—this is your golden ticket when it's time to file your taxes.

Step 4: Claim The Credit

This is where the magic happens. You'll use IRS Form 5884 (Work Opportunity Credit) to actually claim your credit when you file your federal taxes.

Don't forget to attach it to your business tax return using IRS Form 3800 if you're claiming multiple business credits.

Do Part-Time Hires Count?

Great question—and yes! Part-time hires can qualify for the WOTC, too, as long as they meet the eligibility criteria and work enough hours. The catch is that the credit is proportional, meaning less work equals a smaller credit. But hey, something is better than nothing.

Can You Claim the Credit More Than Once?

Absolutely. The WOTC is not a one-and-done deal. You can claim the credit for as many eligible veteran hires as you make in a year. Each person is evaluated individually, so if you hire three qualified veterans, you could be looking at up to $28,800 in tax credits or more.

Common Pitfalls to Avoid

Now, let’s be real—government paperwork isn’t always smooth sailing. Here are some common mistakes employers make:

- Missing the 28-day deadline for submitting certification forms
- Incorrectly completing IRS Form 8850
- Forgetting to verify eligibility before hiring
- Not coordinating with HR or payroll to track hours worked (you’ll need this info to calculate the credit)

Avoid these, and you’ll be in good shape.

How to Make Veteran Hiring a Win-Win

Sure, tax credits are nice, but here’s the bigger picture: investing in veterans can bring long-term benefits to your company culture. Veterans often become standout employees who lead, mentor, and inspire teams.

Want to attract more veteran talent? Here are some tips:

- Partner with local veterans’ outreach programs or job boards
- Highlight your veteran-friendly hiring practices on your website
- Offer training or mentorship programs tailored for veterans transitioning into civilian roles

Final Thoughts

Employing veterans isn’t just a feel-good move—it’s a smart financial strategy. With the right steps, you not only gain a skilled, disciplined team member but also take advantage of tax credits that boost your business’s bottom line.

So don't leave money on the table. With some simple paperwork and smart hiring practices, you can open the door to an incredible talent pool and get rewarded for it.

Quick Recap

- WOTC offers up to $9,600 per eligible veteran hire.
- Submit IRS Form 8850 and ETA forms within 28 days of hiring.
- Claim the tax credit using IRS Form 5884 with your business tax return.
- You can claim the credit for multiple veteran hires each year.
- Don’t forget to check your state for additional incentives!