How to Use the WOTC Tax Credit Calculator
The Work Opportunity Tax Credit (WOTC) is a federal tax credit that rewards employers for hiring from certain target groups who often face barriers to employment — including long-term unemployed individuals, veterans, SNAP recipients, ex-felons, and others certified by a state workforce agency. This calculator estimates the credit based on a new hire's first-year wages, hours worked, and target-group wage cap.
The credit rate depends on how many hours the employee worked: 25% of qualified wages if they worked at least 120 hours, or 40% if they worked at least 400 hours. Wages above the applicable cap don't add to the credit — most target groups cap qualified wages at $6,000 (max credit $2,400 at the 40% rate), while certain disabled veterans have a higher $24,000 cap (max credit $9,600).
To actually claim WOTC, employers must have the employee certified by the state workforce agency within 28 days of the start date, then file IRS Form 5884. This calculator gives a representative estimate — always confirm certification eligibility and exact caps with your state workforce agency or a tax professional.
Frequently Asked Questions
Employers who hire from certain target groups — such as long-term unemployed individuals, veterans, SNAP recipients, and others certified by a state workforce agency — can claim WOTC on qualified first-year wages.
The IRS sets the credit at 25% of qualified wages if the employee worked at least 120 hours, and 40% if they worked at least 400 hours. Employees under 120 hours generally don't qualify at all.