What the Work Opportunity Tax Credit is

The Work Opportunity Tax Credit (WOTC) is a federal tax reduction that employers can claim when they hire people from specific groups that face barriers to employment. The employer gets a credit against their federal income tax — not the worker. The credit ranges from $1,200 to $9,600 per employee hired, depending on which group the person belongs to and how long they stay employed.

The credit exists to encourage businesses to hire people who might otherwise be passed over: formerly incarcerated individuals, veterans, people receiving certain government benefits, long-term unemployed workers, and others. If you are a job seeker in one of these groups, you do not apply for the credit yourself. Your employer applies for it after they hire you, and it reduces what they owe in taxes.

The program is run by the U.S. Department of Labor. Individual states administer the paperwork and verification, so the process and timing vary by location.

Key Takeaways

  • The Work Opportunity Tax Credit is a tax reduction for employers, not direct payment to workers, and ranges from $1,200 to $9,600 per hire depending on the worker's group and tenure.
  • You may be in a WOTC-may be able to access group if you are a veteran, formerly incarcerated, receiving TANF or SNAP, long-term unemployed, a youth in a low-income area, or in several other categories defined by federal law.
  • Your employer must request a certification from your state's workforce agency within 28 days of your hire date, and you may need to provide documents proving your group membership.
  • The credit does not change your wages or benefits, and employers are not required to tell you they are claiming it, though some do.

Which groups of workers may have access to for the credit

The Department of Labor defines nine target groups. An employer can claim the credit if they hire someone who fits into one of these categories at the time of hire:

  • may have access to ex-felons: People convicted of a felony who were hired within one year of conviction or release from prison.
  • may have access to veterans: Veterans who are unemployed and hired within one year of discharge, or veterans receiving Supplemental Security Income (SSI) or Temporary Assistance for Needy Families (TANF).
  • may have access to recipients of TANF: People currently receiving or having received TANF benefits within the past two years.
  • may have access to recipients of SSI: People receiving Supplemental Security Income at the time of hire.
  • may have access to recipients of SNAP: People receiving Supplemental Nutrition Assistance Program benefits, or members of a household receiving SNAP.
  • Long-term family assistance recipients: People who have received TANF for at least 18 months.
  • may have access to long-term unemployed: People who have been unemployed for at least 27 weeks and are receiving unemployment benefits.
  • may have access to youth: People aged 16–24 living in an empowerment zone or enterprise community, or receiving TANF.
  • may have access to individuals with a disability: People with a disability who are referred by a vocational rehabilitation agency, the Veterans Administration, or an organization serving people with disabilities.

You do not need to belong to only one group. If you fit multiple categories, your employer can still claim the credit only once per hire.

How employers claim the credit and what you need to provide

Your employer must request certification from your state's workforce agency (often called the Department of Labor or Workforce Development) within 28 days of your hire date. Missing this deadline means the employer loses the credit for that hire.

To support the claim, you will likely need to provide documents that prove you belong to an may be able to access group. If you are formerly incarcerated, you may need to show court records or a release letter. If you receive TANF or SNAP, your employer will ask for a benefits statement or letter from your state agency. If you are a veteran, a copy of your discharge papers (DD Form 214) is standard. If you are long-term unemployed, your state unemployment office provides verification.

Your employer handles the paperwork with the state — you do not file anything with the IRS yourself. The state verifies your information and issues a certification (or denies it). If certified, your employer claims the credit on their federal tax return.

How much the credit is worth and how long you must stay employed

The credit amount depends on two things: which group you belong to and how long you remain employed at that job.

For most groups, the credit is $2,400 if you work at least 120 hours in your first year, or $1,200 if you work between 30 and 119 hours. For certain groups — long-term unemployed workers, may have access to youth, and individuals with disabilities — the credit can reach $9,600 if you work at least 400 hours in your first year and at least 400 hours in your second year.

Your employer receives the credit on their tax return for the year in which you were hired (or the following year, depending on when certification is complete). The credit does not affect your wages, your tax return, or your benefits. It is purely a reduction in what your employer owes in federal income tax.

What happens if you leave the job early

If you leave the job before reaching the hour threshold your employer needs to claim the full credit, the employer can still claim a partial credit if you worked enough hours. For example, if you worked 90 hours and then left, your employer can claim $1,200 instead of $2,400.

There is no penalty to you for leaving early. The credit is based on hours worked, not on a commitment to stay for a certain length of time. Your employer simply claims whatever credit they are may have access to to based on the hours you actually worked.

If you are fired for misconduct, your employer may lose the credit entirely. The rules define misconduct narrowly — it typically means theft, violence, or violation of a safety rule — not poor performance or attendance issues alone.

How WOTC differs by state

The federal credit is the same everywhere, but states administer the certification process differently. Some states process requests in two to four weeks; others take longer. Some states have additional state-level tax credits on top of the federal one, which means your employer gets an even larger total benefit.

A few states have closed their WOTC programs temporarily due to budget constraints, though the federal program itself remains active. If your employer is in a state with a closed program, they cannot claim the federal credit until that state reopens its certification system.

Your state workforce agency website lists the current status of the program in your state and the specific documents your employer needs to submit. If you are unsure whether your state is accepting applications, ask your employer to contact your state's Department of Labor or workforce office.

Why employers care about this credit and what it means for you

The credit reduces an employer's tax bill, which makes hiring from these groups financially attractive. Some employers actively recruit people in WOTC-may be able to access categories because of it. Others claim the credit without advertising it — you may never know your employer used it.

The credit does not may provide you a job or change how you are treated once hired. It is not a subsidy of your wages. It simply makes it cheaper for an employer to hire you, which can tip the decision in your favor when you are competing with other candidates.

If you are in an may be able to access group, mentioning it during the hiring process can help — some employers know about WOTC and factor it into their hiring decisions. But you are not required to disclose your status, and employers cannot legally discriminate based on the categories that make you WOTC-may be able to access.

Frequently Asked Questions

Does the Work Opportunity Tax Credit affect my wages or taxes?

No. The credit is a reduction in your employer's federal income tax, not yours. It does not change your paycheck, your tax return, or your benefits. You receive the same wages as any other employee in the same role.

What if my employer does not claim the credit — can I claim it myself?

No. Only employers can claim the Work Opportunity Tax Credit. You cannot claim it on your personal tax return. If your employer does not request certification from your state within 28 days of your hire, the credit is lost and cannot be recovered.

Do I have to tell my employer I am in an may be able to access group?

You do not have to disclose it, but your employer must know in order to request certification. If you are comfortable sharing, mentioning it during hiring or onboarding can prompt your employer to pursue the credit. Some employers ask directly; others do not.

What if I was incarcerated but my conviction was expunged or sealed?

You may still be may be able to access. The WOTC rules refer to people convicted of a felony, and expungement or sealing does not erase the conviction for purposes of this credit. You will need court records or a letter from your state's corrections department to prove the conviction and release date. Speak with your employer or your state workforce agency about what documents they accept.

Can I be in the WOTC program and still receive unemployment benefits?

Yes. Being hired does not automatically end your unemployment benefits, though your state may reduce or stop them once you begin work. The WOTC credit is separate from unemployment. Some WOTC-may be able to access groups (like long-term unemployed workers) are defined partly by their unemployment status at the time of hire.