Work Opportunity Tax Credit (WOTC)
WOTC is a Federal tax credit available to employers who hire and retain veterans and individuals from other target groups with significant barriers to employment. Employers claim about $1 billion in tax credits each year under the WOTC program. There is no limit on the number of individuals an employer can hire to qualify to claim the tax credit, and there are a few simple steps to follow to apply for WOTC.
How does WOTC work?
The tax credit employers can claim depends on the target group of the individual hired, the wages paid to that individual in the first year of employment, and the number of hours that individual worked. There is also a maximum tax credit that can be earned.
The tax credit employers can claim depends on the target group of the individual hired, the wages paid to that individual in the first year of employment, and the number of hours that individual worked. There is also a maximum tax credit that can be earned.
- If the individual works at least 120 hours, the employer may claim a tax credit equal to 25% of the individual's first year wages, up to the maximum tax credit.
- If the individual works at least 400 hours, the employer may claim a tax credit equal to 40% of the individual's first year wages, up to the maximum tax credit.
- Only for the Long-term Temporary Assistance for Needy Families (TANF) target group, the credit is available to employers who hire members of this group for a two-year period.
- If the individual works at least 120 hours in the first year, the employer may claim a tax credit equal to 40% of first year wages, up to the maximum tax credit.
- If the individual works at least 400 hours in the second year, the employer may claim a tax credit equal to 50% of second year wages, up to the maximum tax credit.
- Veterans
- TANF Recipients
- SNAP (Food Stamp) Recipients
- Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
- Vocational Rehabilitation Referral
- Ex-felons
- Supplemental Security Income Recipients
- Summer Youth Employee (living in Empowerment Zones)
- Click here for more information about the WOTC target groups.
How are the tax credits calculated?
Employers generally can earn a tax credit equal to 25% or 40% of a new employee's first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours. Use the WOTC Calculator to see how much your business can earn in tax credits.
What are the maximum tax credit amounts?
The maximum tax credit amounts depend on the new employee's target group and the number of hours worked during the first year of employment. Click here for the maximum tax credits associated with each WOTC target group.
Employers generally can earn a tax credit equal to 25% or 40% of a new employee's first-year wages, up to the maximum for the target group to which the employee belongs. Employers will earn 25% if the employee works at least 120 hours and 40% if the employee works at least 400 hours. Use the WOTC Calculator to see how much your business can earn in tax credits.
What are the maximum tax credit amounts?
The maximum tax credit amounts depend on the new employee's target group and the number of hours worked during the first year of employment. Click here for the maximum tax credits associated with each WOTC target group.
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