HIRE Act Offers Tax Breaks, Credits
President Obama recently signed the Hiring Incentive to Restore Employment Act, or HIRE Act, which provides immediate tax breaks and potential income tax credits for hiring and retaining unemployed workers.
For every qualified worker hired after Feb.3, 2010, the employer will not have to pay the 6.2 percent Social Security tax on the worker's income through the end of the calendar year, thus putting more money in the employer's pockets. And for every such worker who is retained at least one year, the employer can claim an income-tax credit of up to $1,000.
For-profit and not-for-profit employers, including colleges and universities, are eligible for the tax breaks, and there is no limit on how many employees can be hired under these terms.
A new hire qualifies for the tax breaks if he or she worked fewer than 40 hours over the 60 days prior to being hired; will be paid less than $106,800 annually; is not related to the employer; and is not displacing a current worker. The new hire can replace an employee who left the company voluntarily or was fired with cause. Full-time and part-time employees are eligible.
Though the HIRE Act covers workers hired since Feb.3, 2010, the tax break covers only wages from March 18, 2010 -- when the bill was signed -- through Dec.31, 2010. Employers who claim the Work Opportunity Tax Credit cannot also claim the new tax exemption on the same wages; they must choose one program at a time.
If the new employee is retained for at least 52 weeks, the employer is eligible for an income tax credit worth $1,000 or 6.2 percent of the wages paid to that employee, whichever is less.
The HIRE Act also extends Code Sec. 179 expensing, which is designed to aid small businesses. Companies that spend less than $800,000 per fiscal year on business machinery and equipment can deduct the cost of those assets up to $250,000. (Companies that spend more than $800,000 are allowed to deduct a lesser amount.)
For more information, contact a Barnes Dennig representative.
