The Work Opportunity Tax Credit (WOTC)
The Work Opportunity Tax Credit (WOTC) is a federal tax credit designed to benefit employers that hire individuals from target groups facing significant barriers to employment. Employers claim an estimated $1 billion each year from the WOTC, a program that has helped put Americans back to work while at the same time stimulating productivity and economic growth.
In late 2015, the WOTC was given a five-year extension with the passage of the Protecting American from Tax Hikes (PATH) Act, ensuring that the credit will be part of the tax code for the foreseeable future.
Eligible Target Groups:
The credit is available to employers that hire the following individuals:
- Veterans
- Temporary Assistance for Needy Family (TANF) Recipients
- Supplemental Nutrition Assistance Program (SNAP) Recipients
- Designated Community Residents
- Residents of Empowerment Zones or Rural Renewal Counties
- Vocational Rehabilitation Referrals
- Ex-Felons
- Supplemental Security Income (SSI) Recipients
- Summer Youth Employees
- Long-Term Unemployed
Employer Benefits
- Depending upon the target group the new hire belongs to, an employer can reduce their federal income tax liability by up to $9,600 per each eligible employee hired
- The credit offsets an employer’s cost for recruiting, onboarding and training of new employees
- There is no cap on the number of eligible people an employer can hire or the amount of tax credits that can be claimed each year
- Private companies, C Corporations, S Corporations, LLC’s and even Non-Profit 501(c)’s can qualify
Benefits for American Workers
- Aides workers who have consistently faced significant barriers to employment
- Incentivizes workplace diversity and facilities access to good jobs for American workers
- Helps workers move from economic dependency into self-sufficiency as they earn a steady income and become contributing taxpayers