Work Opportunity Tax Credit - Program Overview

The Work Opportunity Tax Credit (WOTC) is a federal income tax benefit administered by the U.S. Department of Labor (DOL) for private, for-profit employers who hire individuals from specified target populations. WOTC reduces a business’s federal tax liability, serving as an incentive to select job candidates who may be disadvantaged in their efforts to find employment.

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Eligible employers can receive a federal tax credit ranging from $1,200 to $9,600 for each qualified employee hired under the WOTC program, or $9,000 over a two-year period for employees hired who were long-term public benefit recipients prior to hire. Participating employers who receives a WOTC certification will use IRS Forms 5884 and 3800 to claim the Work Opportunity Tax Credit.

The State of Texas Tax Refund for Employers of TANF or Medicaid Clients is another tax benefit for employers. To qualify, an employer must pay certain State of Texas taxes; have paid wages during the first year of employment to a Texas resident who received at least one month of Temporary Assistance for Needy Families (TANF) or Medicaid benefits within six months of the employee start date; and have provided and paid part of a qualifying employee’s HMO health plan, self-funded or self-insured ERISA plan, or a health plan approved by the Commissioner of Insurance.

Under the State of Texas Tax Refund for Employers of TANF or Medicaid Clients program, an employer may receive a refund of up to $2,000 for each qualifying employee hired.

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Authority & Funding

The PATH Act amends Section 51(c)(4) of the Internal Revenue Code of 1986 (Code). In summary, Title I—“Extenders,” Subtitle B—“Extensions Through 2019,” Section 142, “Extension and Modification of Work Opportunity Tax Credit,” of this Act, is as follows:

  • Retroactively reauthorizes the WOTC program with all its current target groups, without changes or new provisions, for a five-year period, after December 31, 2014, to December 31, 2019
  • Introduces a new target group, a Qualified Long-Term Unemployment Recipient, which is defined as any individual who is certified by the designated local agency as being in a period of unemployment that:
  • Provides for an extension of the empowerment zones for a two-year period, from December 31, 2014, to December 31, 2016

Empowerment Zone Target Groups

The Empowerment Zones (EZ) expired 12/31/2016, therefore, both the Designated community resident-EZ subgroup AND the Summer Youth target group are no longer pursuable beginning with hire dates on/after January 1, 2017.  When/If the EZ’s are re-authorized, DOL will provide TEGL guidance regarding the procedures for processing those expired target groups.

TWC receives applications for WOTC and makes determinations on whether the employer is eligible for the credit.

The U.S. Department of Labor allocates funds to the states for the administration of the WOTC program.

The State of Texas Tax Refund for Employers of TANF or Medicaid Clients is authorized by Texas Administrative Code, Title 34, Part 1, Chapter 3, Subchapter A, §3.4.

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WOTC contact information
-     Call: 800-695-6879
-     Email: