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Tax Incentives for Texas Employers

The Texas Workforce Commission offers Texas employers certain tax incentives for hiring targeted harder-to-place workers.  To offset the additional attention or accommodations necessary to employee these workers, employers may qualify for federal and state tax credits up to $10,500 per employee.

The Work Opportunity Tax Credit (WOTC) is a federal tax credit that reduces the federal tax liability of private employers who hire from eight targeted groups.  The maximum credit is $2,400 per eligible worker for adult target groups.  The credit is 40 percent of up to $6,000 in qualified wages the first year of employment.  Targeted group0s that fit this category include:

• Qualified recipients of Aid to Families with Dependant Children (AFDC) or Temporary Assistance to Needy Families (TANF)
• Qualified veterans
• Qualified ex-felons
• Qualified food stamp recipients
• Qualified supplemental security income (SSI) recipients
• High risk youth living in an empowerment zone or enterprise community
• Referrals from an approved vocational rehabilitation agency

Employers hiring qualified summer youth participants are eligible for tax incentives of 40 percent of the first $3,000 in wages.

Texas employers also may earn Welfare-to-Work Tax Credits when hiring long-term welfare recipients who began work before January 1, 2002.  Tax credits of up to $8,500 are available if the employee is a member of a family:

• That received AFDC/TANF for at least 18 consecutive months before the hire date; or
• Whose AFDC/TANK eligibility under federal or state law expired after August 5, 1997 (for applicants hired within two years after their eligibility expired); or
• That received AFDC/TANF for at least 18 months, beginning after August 5, 1997, and is hired not more than two years after that 18-month period. (The earliest period is February 2001).

The maximum credit for new hires employed for at least 400 or 180 days is 35 percent of qualified wages the first year of employment and 50 percent the second year.  Qualified wages are capped at $10,000 per year.

**Please note: To obtain these tax credits, the employers files IRS Form 8850, which must be postmarked within 21 days of the employee's start date.

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Last modified: August 08, 2007