Work Opportunity Tax Credit (WOTC)
A federal income tax credit that rewards employers for hiring individuals from targeted groups — worth between $1,200 and $9,600 per qualified employee.
The Work Opportunity Tax Credit (WOTC) is a federal income tax credit designed to encourage employers to hire individuals with historically high rates of unemployment. Employers claim about $1 billion in tax credits each year under the program, which helps targeted workers move from economic dependency into self-sufficiency while participating employers reduce their federal income tax liability.
The 2015 PATH Act extended and modified the WOTC program with the following changes:
- Retroactively reauthorized the WOTC target groups for a five-year period.
- Extended the Empowerment Zones for a two-year period.
- Introduced a new target group — Qualified Long-Term Unemployment Recipients — for hires beginning on or after January 1, 2016.
Who Qualifies?
Employers can hire eligible employees from the following target groups:
- Unemployed Veterans (including disabled veterans)
- Temporary Assistance for Needy Families (TANF) Recipients
- Food Stamp (SNAP) Recipients
- Designated Community Residents (Empowerment Zones / Rural Renewal Counties)
- Vocational Rehabilitation Referred Individuals
- Ex-Felons
- Supplemental Security Income Recipients
- Summer Youth Employees (living in Empowerment Zones)
The Value of WOTC
Employers generally earn a credit equal to 25% or 40% of a new employee's first-year wages, up to the maximum for that target group — 25% if the employee works at least 120 hours, and 40% if they work at least 400 hours.
| Target Group | 120+ hrs (25%) | 400+ hrs (40%) |
|---|---|---|
| Short-Term TANF | $1,500 | $2,400 |
| Veterans: SNAP | $1,500 | $2,400 |
| Veterans: Unemployed (4+ weeks) | $1,500 | $2,400 |
| Veterans: Long-Term Unemployed | $3,500 | $5,600 |
| Veterans: Disabled | $3,000 | $4,800 |
| Veterans: Disabled & Unemployed | $6,000 | $9,600 |
| Ex-Offenders | $1,500 | $2,400 |
| Designated Community Residents | $1,500 | $2,400 |
| Vocational Rehabilitation Referrals | $1,500 | $2,400 |
| Summer Youth | $1,500 | $1,200 |
| SNAP Recipients | $1,500 | $2,400 |
| SSI Recipients | $1,500 | $2,400 |
| Long-Term TANF Recipients | $9,000 (over 2 yrs) | — |
Real-World Impact
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