How to Use the Work Opportunity Tax Credit Calculator
The Work Opportunity Tax Credit (WOTC) is a federal tax credit that encourages employers to hire individuals from target groups, including qualified veterans, long-term unemployment recipients, SNAP/TANF recipients, and ex-felons. The credit equals 25% of first-year wages if the employee works 120–399 hours, or 40% if they work 400+ hours, applied against a wage cap that varies by target group (typically $6,000, up to $24,000 for certain veterans).
Enter the employee's first-year wages, hours worked, and applicable wage cap to see the estimated WOTC credit you can claim. To actually claim the credit, employers must submit IRS Form 8850 to their state workforce agency within 28 days of the employee's start date, then file Form 5884 with their tax return.
Frequently Asked Questions
For most target groups, the credit is 25% of first-year wages if the employee works 120-399 hours, or 40% if they work 400+ hours, up to a $6,000 wage cap ($1,500-$2,400 max credit). Certain veteran groups have higher wage caps.
Target groups include qualified veterans, long-term unemployment recipients, SNAP/TANF recipients, ex-felons, and designated community residents, among others defined by the IRS and Department of Labor.
Employers must submit IRS Form 8850 to their state workforce agency within 28 days of the employee's start date, then claim the credit on Form 5884 when filing taxes.