Legislation offering tax credits for hiring vets gives businesses tax reductions

A recently approved provision of the American Jobs Act will help businesses to lower their tax burdens by hiring veterans. The provisions, which were introduced by President Barack Obama and recently passed the House and Senate, provide tax credits that are meant to put veterans back to work, according to The Wall Street Journal.

The recently approved tax credits will incentivize private businesses by offering them $9,600 if they hire disabled veterans, Inc Magazine reports. These "Wounded Warriors" credits previously offered businesses $4,800 before being expanded to the current amount. Further tax credits are offered to businesses that hire veterans who have been jobless for at least four weeks.

These tax credits come at a time when many many veterans are returning home and suffering from unemployment that averages 11.5 percent, which is around 25 percent higher than the nationwide jobless rate, according to the media outlet. A nationwide initiative called Joining Forces has been created to put more than 100,000 veterans and military spouses back to work by 2014.

"That's 100,000 veterans and spouses who will have the security of a paycheck and good career," first lady Michelle Obama stated when giving a speech to the U.S. Chamber of Commerce on November 10, the media outlet reports. "That's thousands of families that can rest just a little bit easier every night."

Although these tax credits can help businesses lower their costs, another way that firms can improve their resiliency and boost their bottom line is utilizing 1031 exchanges to obtain tax benefits on swaps of commercial property, trucking equipment, intellectual property, bullion of precious metals and other transactions.

Businesses can set up these transactions with qualified intermediaries to obtain tax benefits by engaging in like-kind exchanges. The primary benefit gained is deferral of taxation. Since taxes on goods sold are deferred, firms utilizing this option can retain all the equity they had in the facility, vehicle or capital good sold. This will mean less leverage will be needed when purchasing the replacement item.

Reduced debt translates to lower interest costs and debt payments. Payments on debt are made out of operating income, which can be taxed at rates as high as 40 percent. Using a 1031 exchange can lower tax costs for businesses that need to make debt payments.