Work Opportunity Tax Credit Helps Both Employers and Struggling Job Seekers
The Work Opportunity Tax Credit (WOTC) is a federal tax credit for businesses that hire specific types of people who face extra challenges getting a job. The amount of the credit varies based on the employee’s group and hours worked. The total savings on taxes ranges from $2,400 to $9,600. For most hires, the credit is 40 percent of first-year wages (up to $6,000) for employees working at least 400 hours.
What Groups Qualify for the Work Opportunity Tax Credit?
- Recipients of Temporary Assistance for Needy Families (TANF) and/or Supplemental Nutrition Assistance Program (SNAP, often referred to as food stamps) benefits.
- Qualified veterans.
- Qualified ex-felons.
- Designated Community Residents (DCR). These are people between 18 and 40 who live in a designated Empowerment Zone or Rural Renewal County.
- Vocational rehabilitation referrals. These are hires with a physical or mental disability who are enrolled in or have completed a qualifying rehab program.
- Qualified summer youth employees. These are summer workers age 16 or 17 who live in an Empowerment Zone.
- Qualified Supplemental Security Income recipients.
- Long-term family assistance (aka welfare) recipients.
- Qualified long-term unemployment recipients. These are hires who have been unemployed at least 27 weeks and have received unemployment benefits at least some of that time.
How to Apply
Employers must get certification from the state employment authority that the new hire is a member of a targeted group before they can claim the tax credit. Next, taxable employers claim the Work Opportunity Tax Credit as a general business credit against their income taxes, while non-profit organization employers claim the WOTC against their payroll taxes.
Hurry to Apply
After having been renewed the WOTC for many years, Congress did not include it in their latest budget. So, to claim the credit, employers must apply by December 31, 2025. However, there has been increasing pressure to keep the tax credit in effect into 2026.
Links
Washington’s Employment Security has instructions on how to apply along with links to all the necessary forms.
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