Work Opportunity Tax Credit
Employers may elect to claim a work opportunity credit (WOTC) for a percentage of first-year wages, generally up to $6,000 per employee, for hiring workers from a targeted group. The credit is in lieu of deducting the compensation on which the credit is based as an expense on the employer’s tax return. First-year wages are wages paid during the tax year for work performed during the one-year period beginning on the date the target group member begins work for the employer.
- Generally, the credit is 40% of first-year wages (but not exceeding $6,000), for a maximum credit of $2,400 (.4 × $6,000). For certain qualified veterans, the credit may be claimed on up to $24,000 of wages.
- The credit is reduced to 25% for employees who have completed at least 120 hours, but less than 400 hours of service for the employer. No credit is allowed for an employee who has worked fewer than 120 hours.
This credit sunsets (expires) after 2019.
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