California’s Work Opportunity Tax Credit

Did you know? You could receive a federal tax credit incentive of up to $9,600 for hiring certain employees.

The California Employment Development Department has a unique program called the Work Opportunity Tax Credit (WOTC), designed to promote the employment of individuals in certain target groups and incentivize employers who hire them.

This is a win-win program: employers can gain skilled labor at an affordable rate, while target group individuals gain opportunities for meaningful employment they might not have been privy to otherwise. 

Which target groups are part of the program?

There are 10 different groups of people eligible to be hired under the stipulations of California’s WOTC. They are as follows:

  1. Recipients of Temporary Assistance to Needy Families (TANF).
  2. Qualified veterans receiving Food Stamps or with a service-connected disability who:
    • Have a hiring date not more than one year after discharge or release from active duty, or
    • Have a total period of unemployment during that first year, ending on the hiring date, equal to or in excess of six months
  3. Ex-felons hired within one year after conviction or release from prison
  4. Designated Community Resident – an individual aged 18-39 who resides in an Empowerment Zone or Rural Renewal County
  5. Vocational rehabilitation referrals including Ticket Holders with individual work plans developed by an Employment Network
  6. Summer youth ages 16 and 17 who reside in an Empowerment Zone
  7. Food Stamp recipients ages 18-39
  8. Recipients of Supplemental Security Income (SSI)
  9. Long-term family assistance recipients
  10. Long-Term unemployment recipients

How much tax credit can you receive as an employer? 

The amount of the tax credit you may qualify for depends on which target group your new employee qualifies under. For example:

  • The tax credit for target groups 1, 2, 3, 4, 5, 7, 8, and 10 is 40% of first-year wages, up to $6,000, assuming the individual is retained for at least 400 hours. If the individual is retained for less than 400 hours, but at least 120 hours, a 25 percent tax credit is granted. 
  • For target group 6 (summer youth), the maximum amount of wages for which the tax credit can be applied is $3,000. 
  • The credit for target group 9 is 40% of first-year wages, up to $10,000, and 50% of second-year wages, also up to $10,000. These individuals must be retained for at least 180 days or 400 hours.

For more specifics on tax credits, visit the Employment Development Department Work Opportunity Tax Credit website.

Benefit to employers

Depending on the industry, WOTC-qualified new hires can account for nearly 25% of a manufacturer’s total new hire pool in any given year. Since the WOTC is not a one-time credit, but rather a once-per-qualified-new-hire credit, this can bring great deal of financial relief to area employers. 

And don’t forget: there’s also the incentive to retain these new employees. Because cashing in on the credit requires a well-designed applicant screening process, it’s to your benefit to train these qualifying workers well so they can produce high-quality results for your company for years to come.

For more information on qualifications for the California Work Opportunity Tax Credit, or to apply, we encourage you to contact either the WOTC office directly. If you’re ready to apply but need some assistance, the Alliance for Workforce Development offers additional information and help filling out the application.