ARTICLE | February 14, 2025

The Work Opportunity Tax Credit (WOTC) is a Federal tax credit available to employers for hiring individuals from certain targeted groups who have consistently faced significant barriers to employment. Learn more about this credit and how it can potentially reduce your federal tax liability.

What is the Work Opportunity Tax Credit?

The WOTC is a tax incentive for employers to hire certain hard-to-place job seekers. The goal is to help these individuals become economically self-sufficient and to reward employers who give them a chance for employment. The Consolidated Appropriation Act, 2021 authorized the extension of the Work Opportunity Tax Credit (WOTC) until December 31, 2025.

What Employers are Eligible?

Private-sector employers of any size may participate in the WOTC program.

Tax exempt organizations may only claim the credit for qualified veterans who began work for the organization after 2020 and before 2026.

If you choose to apply for the WOTC, you must submit your application to the Employment Security Department within 28 days of the eligible employee’s start date.

What Workers are Eligible?

If you employ one of the following general categories of workers, you may qualify for the WOTC:

• Public assistance recipients, if they meet the eligibility requirements for SNAP (food stamps), Temporary Assistance to Needy Families (TANF) or long-term TANF.
• Several categories of military veterans, including disabled veterans, recently discharged veterans, etc.
• Justice-involved individuals hired within a year after their date of conviction, work release, or release from prison or jail.
• People with disabilities participating in state or federal vocational-rehabilitation programs who’ve had an “individual written plan” for employment in the two years before being hired.
• Anyone who received Supplemental Security Income (SSI) for any month in the 60 days before being hired.
• Long-term unemployed individuals hired on or after Jan. 1, 2016 (must have been unemployed at least 27 consecutive weeks).

Temporary, seasonal, part-time and full-time workers hired for any job type who work a minimum of 120 hours in their first 12 months of employment can qualify. However, if you’re an employer, you cannot claim the WOTC for relatives, former employees or undocumented aliens.

What Employers Receive

Employers can reduce their federal business taxes by up to $2,400 for most eligible new hires; and up to $9,000 over two years for each qualifying TANF recipient who is hired. The tax credit for veteran categories range from $2,400 to $9,600. Ultimately, the amount of credit you receive is determined by:

• The group under which the employee qualifies
• Number of hours worked
• Wages earned during the employment period

The credit is limited to the business’ income tax liability (taxable business) or the amount of employer Social Security tax owed on wages paid to qualifying employees (qualified tax exempt organization). You may apply for the credit against its business income tax liability and the normal carry-back and carry-forward rules apply.

We Can Help

Taking advantage of tax credits can be complex and confusing. When it comes to WOTC, we can help you comply with the requirements to apply within the short timeframe this credit is available to you. When working with us, you’ll benefit from identifying eligible hires for a potential credit while gaining a valuable employee and diverse workforce.