Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers for hiring individuals from certain target groups who have consistently faced significant barriers to employment. WOTC joins other workforce programs that incentivize workplace diversity and facilitate access to good jobs for American workers.
WOTC helps targeted workers move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers, while participating employers are able to reduce their income tax liability.
The maximum tax credit ranges from $1,200 to $9,600, depending on the employee hired.
Veterans Target Group
To be considered a veteran eligible for WOTC, an individual must meet these two standards:
- Veterans Target Group
- Have served on active duty (not including training) in the U.S. Armed Forces for more than 180 days or have been discharged or released from active duty for a service-connected disability; AND
- Cannot have a period of active duty (not including training) of more than 90 days that ended during the 60-day period ending on the hiring date.
- To be eligible for WOTC, a veteran must also be one of the following:
- A member of a family that received Supplemental Nutrition Assistance Program benefits (food stamps) for at least 3-months during the 15-month period ending on the hiring date; OR
- Entitled to compensation for a service-connected disability and was
- Unemployed for at least 6 months in the year ending on the hiring date; OR
- Unemployed for:
- At least 4 weeks (but less than 6 months) in the year ending on the hiring date, or
- At least 6 months in the year ending on the hiring date
Long-Term or Short-Term TANF Recipient
- Short-term Temporary Assistance for Needy Families (TANF) Recipient
- An individual who is a member of a family that:
- Received TANF benefits for any 9 months during the 18-month period ending on the hiring date
- Long-term TANF Recipient
- An individual who is a member of a family that meets one of the following:
- Received TANF benefits for at least 18 consecutive months ending on the hiring date; OR
- Stopped being eligible for TANF payments during the past 2 years because a Federal or state law limited the maximum time those payments could be made, and the individual is hired not more than 2 years after such eligibility ended; OR
- Received TANF benefits for any 18 months after August 5, 1997, and has a hiring date that is not more than 2 years after the end of the earliest 18-month period after August 5, 1997
- Supplemental Nutrition Assistance Program (SNAP) Recipient
- An individual age 18-39 years who is a member of a family that received SNAP benefits (food stamps) for:
- The 6-month period ending on the hiring date; OR
- At least 3 of the 5 months ending on the hiring date, in the case of a family member who ceased to be eligible for such assistance under Section 6(o) of the Food Stamp Act of 1977
Designated Community Resident
An 18-39 year old who lives within one of the federally-designated Rural Renewal Counties or Empowerment Zones. For additional information on Rural Renewal Counties or Empowerment Zones click here
A listing of current Empowerment Zones (EZs) can be found at: click here
To locate Empowerment Zones, visit the EZ Locator at: click here
Vocational Rehabilitation Referral
An individual with a disability who completed or is completing rehabilitative services from a state certified agency, an Employment Network under the Ticket to Work program, or the U.S. Department of Veteran Affairs.
Ex-Felon Target group
- An individual who:
- Has been convicted of a felony; AND
- Who is hired within 1 year after the conviction or release date from prison
Supplemental Security Income
An individual who received Supplemental Security Income (SSI) benefits for any month that ended during the 60-day period ending on the hire date.
Summer Youth Target group
- Summer Youth Employee
- A 16 or 17 year-old youth who:
- Works for the employer between May 1st and September 15th; AND
- Lives within one of the federally-designated Empowerment Zones
- see 'Designated Community Resident' section above for 'Empowerment Zone' links
- Which employees do not qualify to be certified?
- Some employees do not qualify the employer for the WOTC. They include:
- Relatives and dependents of the employer, including sons, daughters, stepchildren, spouses, fathers, mothers, brothers, sisters, step-brothers or sisters, nephews, nieces, uncles, aunts, cousins, or in-laws
- Former employees, regardless of how long it has been since he/she last worked for the employer (except for summer youth)
- Majority owners of the business
- What wages do not qualify for the tax credit calculation?
- Wages include all remuneration paid to an employee. However, to qualify, the wages must be:
- Wages for which the employer pays Federal Unemployment Tax Act (FUTA) taxes
- Wages actually paid by the employer, including those to on-the-job training (OJT) participants. If the OJT worker is receiving subsidized wages directly from another party, or indirectly paid through the employer, then the wages do not qualify (although the hours worked for the employer count for the minimum retention period)
For more detailed information on the WOTC, please visit the USDOL website