WOTC Wednesday: How are the Work Opportunity Tax Credits Calculated?

CMS’s Brian Kelly answers your questions about the Work Opportunity Tax Credit.

Today’s WOTC Wednesday question: How are the Work Opportunity Tax Credits Calculated?

CMS Responds: The Work Opportunity Tax Credit is calculated based on three different variables. First the employee has to qualify for one of the ten target groups.  secondly they have to work enough hours and earn enough dollars to hit the minimums of the Work Opportunity Tax Credit.

There are TWO main benchmarks:

  • The employee must work a minimum of 120 hours for you, as an employer, to receive a 25% tax credit of the first $6,000 in wages. Maximum would be $1,500 if it meets that threshold.
  • The second benchmark is that the employee reaches 400 hours worked. You would then receive 40% tax credit of the first $6,000 in wages, which is $2,400.

There are some variations, depending on the target group. For example, Long Term TANF recipients would qualify for up to $9,000, taken over 2 years of employment.

AND the Veteran Target groups can go from $2,400 up to $9,600.

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