Work Opportunity Tax Credit

 

The Work Opportunity Tax Credit ("WOTC") is a federal income tax credit incentive provided to private sector employers who employ certain target groups of job seekers who face employment barriers.

 

Your business does not need to be located in a Federal Empowerment Zone to qualify for this credit. The WOTC tax credit is based on hiring new hires and there is no limit to the number of new hires who can qualify an employer for the tax credit.

 

The WOTC can range between $2,400 - $9,600 for each newly hired qualified employee, which can result into significant income tax savings.

What Are WOTC Target Groups?

 

 

  • Family member of Supplemental Nutrition Assistance Program (SNAP)
     food stamp recipient

  • Family member of Temporary Assistance to Needy Families (TANF) recipient

  • Family member of Long-term family assistance recipient

  • Resident of Federal Empowerment Zone or Rural Renewal Community

  • Supplemental Security Income (SSI) recipient

  • Vocational Rehabilitation referral

  • Unemployed/Disabled Veteran

  • Ex-felon

  • Long-term Unemployment recipient

How Many People Qualify?

 

Based on the 2017 national summary from the Department of Labor ETA, the qualifying ratio was approximately 30%.

For example, if the company hires 100 employees per year, approximately 30 of the new employees may qualify. 

The potential benefit will be approximately $72,000 of tax credit each year.

Study Case

Case 1

Following is a case study of an actual company in the security industry.

 

Study Highlights

  • New hires in 2014: 90 employees
  • Qualified employees: 28 employees   
  • Total WOTC Tax Credit Amount: $52,052

 

 

Case 2

Following is a case study of an actual company in the service industry.

 

Study Highlights

  • New hires in 2014: 171 employees
  • Qualified employees: 45 employees   
  • Total WOTC Tax Credit Amount: $66,502

Update

What's new from "Tax Extender" this year?

 

The Protecting Americans from Tax Hikes (PATH) Act of 2015 was approved and signed by the President on December 18, 2015 with some key changes:

  • WOTC was extended through the end of 2019.
  • Additionally, the long term unemployed individual category was added as a new qualifying criteria.
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