Q: What Is the Work Opportunity Tax Credit, and How Do I Qualify?

The Work Opportunity Tax Credit is an incentive available for companies that hire employees from disadvantaged and underrepresented groups.

The idea behind the WOTC is to help workers in target groups have an easier time getting hired so they can gain economic independence. It’s a well-used program, with businesses claiming over $1 billion from work opportunity tax credits annually.

The Department of Labor has a full list of these groups, but they include:

  • Unemployed veterans (including disabled veterans)
  • Temporary Assistance for Needy Families (TANF) recipients
  • Food stamp (SNAP) recipients
  • People who live in “Empowerment Zones” or “Rural Renewal Counties”
  • People who have been referred to vocational rehabilitation
  • Ex-felons
  • Supplemental Security Income recipients
  • Summer youth employees
  • Qualified recipients of long-term unemployment benefits

Get more details about which types of employees are eligible here.

Simple time tracking that syncs with payroll.

How much is the tax credit?

Companies who hire qualifying employees can earn between $1,200 and $9,600 per employee. The amount varies depending on who the business hires from the eligible groups.

For example, if you hire a youth employee for a summer position, you could receive a tax credit of up to $1,200 for that hire. On the other end of the spectrum, if you hire a qualified veteran, you could receive a tax credit of up to $9,600.

The amount of tax credit you can receive is based on certain factors, including:

  • The target group of the individual
  • Duration of unemployment
  • Wages paid to the incoming worker
  • How many hours the employee works in their first year of employment

There is no cap on the number of target group employees a business can hire. So, the more qualifying employees you hire and retain, the higher your tax credit will be (woo!).

Can I retroactively get the WOTC?

Yes, qualified employers can claim the WOTC if they hired a target group employee between January 1, 2015 and January 1, 2020.

Find more information on the WOTC and hiring details from each targeted group at the Department of Labor.

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