Employers who hire and retain individuals from specified target groups may qualify for a federal tax credit.
The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who hire individuals facing significant barriers to employment. The target groups of individuals include:
- Unemployed Veterans (including disabled veterans)
- Temporary Assistance for Needy Families (TANF) Recipients
- Food Stamp (SNAP) Recipients
- Designated Community Residents (living in Empowerment Zones or Rural Renewal Counties)
- Vocational Rehabilitation Referred Individuals
- Summer Youth Employees (living in Empowerment Zones)
- Supplemental Security Income Recipients
- Qualified Long-Term Unemployment Recipients
Employers can receive a tax credit equal to 25% of a new employee’s first-year wages if the employee works at least 120 hours and a 40% credit if the employee works at least 400 hours. The tax credit will depend on the target group, the wages paid in the first year of employment, and the number of hours worked. There is a cap on the tax credit employers can earn.