The federal Work Opportunity Tax Credit (WOTC) could be a boost to your bottom line – a one-time credit up to $9,600 per qualified new hire.

To be eligible for a WOTC, employers need to hire workers that qualify as belonging to a group of people that face significant barriers to employment, such as:

  • unemployed veterans or veterans with a service-related disability
  • qualified individuals experiencing long-term unemployment
  • vocational rehabilitation plan referrals
  • Temporary Assistance for Needy Families recipients
  • formerly incarcerated individuals or those previously convicted of a felony
  • Supplemental Nutrition Assistance Program recipients
  • Supplemental Security Income program recipients
  • qualified long-term family assistance recipients
  • designated community residents living in Empowerment Zones or Rural Renewal Counties. (Some Empowerment Zone designations have expired. However, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 provides for an extension of the designations to the end of 2025. State and local governments are responsible for filing these extensions.), and
  • youth (at least age 16, but not yet 18) summer workers (between May 1 and September 15) that live in an Empowerment Zone.

The tax credit amount is 40% of the employee’s qualified wages if the employee works at least 400 hours during the first year of employment. If the employee works less than 400 hours, but at least 120 hours, the credit is 25% of the employee’s qualified wages. However, employers can’t claim the credit for employees that are rehired.

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