How tax credits work
If you are a "for-profit" employer in Massachusetts, you may be eligible for a
federal tax credit through the Work Opportunity Tax Credit program. There are
eight targeted groups. Individuals must be identified as members of one of these
targeted groups before a job offer is made.
The Work Opportunity Tax Credit (WOTC) program, which includes the
Welfare-to-Work Tax Credit, has two purposes:
- To help individuals who qualify as members of a target group to get a job,
and
- To help employers who hire qualified individuals by giving them a credit
on their federal taxes.
Target Groups
- A member of a family that is receiving or has received Transitional Aid to
Families with Dependent Children (TAFDC) benefits or Temporary Assistance to
Needy Families (TANF) for at least any 9 of the last 18 months.
- An 18 to 24 year old member of a family that is receiving or has recently
received food stamps.
- An 18 to 24 year old resident of one of the 105 federally designated
Empowerment Zones/Enterprise Communities. Certain census tracts in Boston,
Lowell and Lawrence meet these requirements.
- A 16 to 17 year old Empowerment Zones/Enterprise Community resident hired
between May 1 and September 15 as a Summer Youth Employee. Certain census
tracts in Boston, Lowell and Lawrence meet these requirements.
- A veteran who is a member of a family that is receiving or has recently
received food stamps.
- A disabled person who completed or is completing rehabilitative services
from the Commonwealth or the U.S. Department of Veterans Affairs.
- An ex-felon who is a member of a low-income family.
- A recipient of Supplemental Security Income (SSI) benefits.
Amount of the credit
For seven of the eight above targeted groups, the federal tax credit is 40
percent of the first $6,000 in wages - for a maximum credit of $2,400.
For summer youth, the tax credit is 40 percent of the first $3,000, for a
maximum credit of $1,200.
Employment duration
The person hired must be employed for at least 400 hours. If the person hired is
employed at least 120 hours but less than 400 hours, the employer is entitled to
a tax credit of 25% of the first $6,000 in wages.
The Welfare-to-Work Tax Credit is a federal income tax credit that encourages
employers to hire long-term family assistance recipients who received TANF
payments for the last 18 months, or received TANF payments for any 18 months
beginning after August 5, 1997, and the earliest 18–month period beginning after
August 5, 1997, ending within 2 years of the hire date.
The Welfare-to-Work Tax Credit for new hires employed 400 or more hours is
35% of qualified wages for the first year of employment and 50% for the second
year. Qualified wages are capped at $10,000 per year.
Cooperating agencies
If you want to hire a member of one of the targeted groups, you may want to
contact one of these agencies:
- Department of Transitional Assistance
- Department of Mental Health
- Department of Mental Retardation
- Massachusetts Rehabilitation Commission
- Department of Corrections
- Commission for the Blind
- Commission for the Deaf and Hard of Hearing
- Department of Veterans Affairs
- Commonwealth of Massachusetts
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