Tax Credits for Hiring the Disabled: Incentivize Your Hiring

incentivize your hiring process with tax credits

If you have a business, you may qualify for a tax incentive from the IRS for hiring those individuals with disabilities. The government uses tax credits to encourage employers to hire people who might have faced employment challenges in the past. When businesses try to hire these qualified workers, they can enjoy many tax breaks, leading to thousands of incentives in the form of Work Opportunity Tax Credits. Here are a few things you need to understand about tax credits for hiring the disabled. 

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How Tax Credits Work

Any business can apply for a tax credit when it hires people with disabilities. Along with that, there is no limit to the number of qualifying new hires for each year. With these credits, tax breaks are applied to the percentage of wages paid to the employees during that first year of employment. The credit amount will vary by group. However, most businesses will see a tax percentage between 25% to 40%, depending on whether the employees work part- or full-time. But some qualifying groups can also earn a tax incentive for a second year. For example, the government allows an employer to double the credits for any disabled veterans, with a maximum credit of $9,600.

Did you know that you may qualify for tax credits when hiring an employee with a disability? At TaxRobot, we can help you determine whether you can claim these credits for your business. Schedule your consultation today!

Which Groups Qualify for Tax Credits?

Several groups of employees can qualify for these tax credits in the United States. They include:

  • Recent SSI recipients
  • Participants in vocational rehabilitation
  • Recently separated veterans who have a service-related disability

For now, these are the primary groups, but the United States government can change the qualification of the WOTC from one year to the next. In many situations, the government will allow companies to reinstate their expired credits retroactively, meaning they can collect credit for employees hired in previous years. Therefore, employers should always gather information from hires regarding their qualifying status. The WOTC forms should be completed during the onboarding process. Businesses should return these forms to the government no later than 28 days from the hire date. 

Related: Form 7200 Instructions 2022: Step-by-Step 

Obstacles When Applying for Tax Incentives for Hiring People with Disabilities

In some cases, getting job candidates to admit they may have a disability can be challenging. Since many disabled workers have faced discrimination in hiring practices, experienced limitations in their careers, or have been fired; they may not want to disclose that information. Businesses will want to encourage hiring these individuals to help make their workplace more inclusive and non-discriminatory. 

With that, employers should back up their statements by making the workplace accessible and providing a supportive work culture and environment. By partnering with local agencies, businesses can help hire those individuals with disabilities who may have been passed over for other candidates. With that practice, employers can take advantage of any tax incentives for hiring candidates with disabilities. 

tax credits help disabled workers find better job opportunities

Additionally, some businesses do not know about the tax credit processes. These employers are unaware they could qualify for tax breaks by hiring individuals with disabilities. In some cases, these businesses might believe that the program has complex rules, making them avoid capturing any available tax credits. The government has tried to bridge the information gap by offering educational programs. 

Determining tax credit eligibility can be done seamlessly into the onboarding process, ensuring that your business claims all of the available credits. Besides enjoying tax credits, companies can learn about the advantages of hiring disabled employees in their communities. 

Related: How R&D Credits Help With Payroll Taxes [2023] 

Available Tax Credits 

What tax credits are available to businesses? Here are a few of the credits for hiring disabled workers.

Work Opportunity Tax Credit

Employers are incentivized to hire qualified individuals from that targeted group with this credit. The maximum tax credits range from $1,200 to $9,600, depending on the employee and their length of employment. WOTC helps to employ individuals from those listed target groups, especially since many have faced barriers to employment. Over the years, some changes to the programs have stemmed from the Protecting Americans from Tax Hikes Act of 2015 (PATH Act). 

Disabled Access Credit

Some small businesses can incur expenses when they provide improved access to persons with disabilities. In those cases, they may qualify for the Disabled Access Credit. For a small business to qualify, it must earn less than $1 million in a year. These businesses can have no more than 30 full-time employees. The company can take this credit every year they incur access expenditures. Several types of expenditures lead to credits for these businesses. 

Related: Research and Experimentation Tax Credit Guide 

Barrier Removal Tax Deduction

With the Architectural Barrier Removal Tax Deduction, businesses are encouraged to remove transportation and architectural barriers to help the mobility of the elderly and persons with disabilities. Companies are allowed to claim a deduction of up to $15,000 per year for any qualified expenses. Most of these expenses would be customarily capitalized. When the business claims the deduction, it will be listed as a separate expense on the individual’s income tax return. Additionally, if those expenses meet the government requirements, businesses can use this tax and the architectural/transportation tax deductions in the same year. However, if a company wants to claim both deductions, the credits must be equal to the difference between the total expenditure and the amount of the credits claimed on the taxes. 

tax credits can help businesses save money

Tax Credits Help Incentivize Businesses and Employers

There are several types of tax benefits and credits for those businesses that hire individuals with disabilities. Many of these incentives range from itemized deductions to exemptions to credits. Hiring disabled workers can create a more inclusive work culture and environment while adding financial credits to the business. These tax credits are an excellent way to help those workers who have faced barriers to securing employment. 

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