Valuable Hiring Tax Credit Extended Through 2019
For nearly 40 years, businesses have been able to claim a tax credit for hiring employees who are members of certain targeted groups.
During many of those years, though, the Work Opportunity Tax Credit (WOTC) expired and wasn't extended by Congress until year end, creating uncertainty for employers. But, thanks to the Protecting Americans from Tax Hikes (PATH) Act of 2015, the WOTC is now available through the end of 2019.
Targeted groups that qualify
There's a wide range of targeted groups of employees whose hiring may qualify your dealership to claim the WOTC. They include:
- Long-term family assistance recipients and recipients of Temporary Assistance for Needy Families,
- Recipients of Supplemental Nutrition Assistance Program and Supplemental Security Income benefits, and
- Qualified veterans and ex-felons.
Starting this year, the list of targeted groups has been expanded to include qualified recipients of long-term unemployment benefits (individuals who have received these benefits for at least 27 weeks).
To claim the WOTC for wages paid to an employee who's a member of a targeted group, the employee must work at least 120 hours for your dealership during the first year. In this scenario, the credit equals 25% of qualified wages, up to the applicable limit. If the employee works more than 400 hours during the first year, the percentage rises to 40%.
Money you can save
The credit generally applies to the first $6,000 in qualifying employees' wages, with some exceptions. The maximum credit per qualifying employee is generally $2,400, though the credit for a qualifying veteran can be as high as $9,600. There's no limit on the number of qualified individuals you can hire.
There are more details on the WOTC that you should investigate further before proceeding. Consult with your tax advisor about your dealership's specific situation.
Dealer Insights - September/October 2016