​(Almost) Everything You Need to Know about the Work Opportunity Tax Credit

There’s an employer tax credit out there that you might not know about.

It’s called the Work Opportunity Tax Credit (or “WOTC” because the government loves abbreviations). And it’s available to employers who hire employees from one or more of nine targeted groups.

Here’s a rundown of the groups (get ready for more abbreviations and acronyms):

• Qualified veterans
• Those who were previously incarcerated or convicted of a felony
• Qualified members of families receiving assistance under the Temporary Assistance for Needy Families (TANF) program
• Qualified members of families in the Supplemental Nutritional Assistance Program (SNAP)
• Designated Community Resident (DCR)

• At least 18 but younger than 40
• Lives within one of these three areas:
  • An Empowerment Zone (EZ)
  • An Enterprise Community (EC)
  • A Renewal Community (RC)
• Continues to live in one of those areas after employment

• Vocational rehabilitation referrals
• Qualified summer youth employees
• Qualified Supplemental Security Income recipients
• Those receiving long-term family assistance
• Those experiencing long-term unemployment

The tax credit amount depends on the type of eligible employee you employ. It could be as high as $9,600 for some employees. Determining the tax credit amount can get tricky, so it’s best to talk to your advisor or tax professional.

And because it’s a federal tax credit, you know it comes with a lot of other rules and stipulations. For instance:

• The credit usually only applies to eligible employees who start working for you before Jan. 1, 2026.
• Employees who qualify must have completed at least 120 hours of service for you as an employer.
• You can’t take advantage of the tax credit for certain employees related to you or if they work more than 50% of their time outside of your business (like if they worked as a housekeeper in your home.)
• The credit isn’t usually available for employees who’ve worked for you previously.
• There’s no deduction allowed for the portion of wages equal to the work opportunity credit determined for the tax year.
• The government usually reduces your other employment-related credits for employees that make you eligible for a WOTC.
• If your credits are limited, they’re allowed to be carried over.

There are a lot of other rules around WOTC, too, so if you’re wondering if your business qualifies, reach out to us.