The Work Opportunity Tax Credit (WOTC) is not one but several tax credits given to employers for hiring certain individuals who meet specific criteria. The amount of the WOTC varies by individual hired:
- $2,400 for each new adult hire;
- $1,200 for each new summer youth hire,
- $4,800 for each new disabled veteran hire, and
- $9,000 for each new long-term family assistance recipient hired over a two-year period.
Target Groups for Hiring
The new employee hired must be in one of nine target group and must be qualified by the state employment agency at time of hire:
- Long term Temporary Assistance for Needy Families (TANF) recipient
- Other TANF recipient
- Food stamp recipient
- Designated community residents (DCR) who live within Empowerment Zones or Rural Renewal Counties
- Summer youth employee
- Veterans (under the Returning Heroes Tax Credit and Wounded Warriors Tax Credit)
- Vocational rehabilitation referral
- Ex-felons (hired within one year after conviction or release from prison)
- Supplemental Security Income (SSI) recipient.
The Vow to Hire Veterans Act, signed November 21, 2011, created the Returning Heroes Tax Credit and Wounded Warriors tax credit to re-instate tax credits for hiring veterans which had expired December 31, 2010. Read more about the Returning Heroes and Wounded Warrior Tax Credits.
Length of Hire
The Department of Labor specifies that employers must meet minimum hiring length requirements to qualify for the WOTC:
All new adult employees must work a minimum of 120 or 400 hours. Individuals hired as Summer Youth employees must work at least 90 days, between May 1 and September 15, before an employer is eligible to claim the tax credit. The WOTC amount an employer may claim depends on the hours the employee works. The credit is 25% of qualified first-year wages for those employed at least 120 hours but fewer than 400 hours and 40% for those employed 400 hours or more.
To Qualify for WOTC
To qualify, you must submit an application for each employee hired. If approved, you can include that employee on your tax credit application with your business tax return. Read more about How to Qualify for the Work Opportunity Tax Credit and check the Department of Labor WOTC page for details and forms.