Work Opportunity Tax Credit in Texas: How Employers Can Claim WOTC

The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who hire individuals from targeted groups that face significant barriers to employment. For Texas businesses, WOTC can provide tax credits of up to $2,400 to $9,600 per qualifying new hire, depending on the target group and hours worked. The program is administered in Texas through the Texas Workforce Commission (TWC).

This guide explains how WOTC works, which target groups are eligible, the credit amounts, and how Texas employers can apply for the credit.

How WOTC Works

WOTC is claimed by employers on their federal income tax return. The credit is based on qualified wages paid to eligible employees during their first year of employment. To claim the credit, employers must:

1. Hire an individual from a qualifying target group
2. Submit IRS Form 8850 to TWC within 28 days of the employee's start date
3. Receive certification from TWC that the employee belongs to a qualifying target group
4. Claim the credit on the employer's federal tax return

The 28-day filing deadline is critical. If Form 8850 is not submitted to TWC within 28 days of the hire date, the credit cannot be claimed for that employee.

Qualifying Target Groups

WOTC covers these target groups based on published IRS and DOL criteria:

• Veterans: Including veterans who received SNAP benefits, unemployed veterans, disabled veterans, and veterans who were unemployed for extended periods. Credits range from $2,400 to $9,600 depending on the veteran's circumstances.
• SNAP (food stamp) recipients: Individuals aged 18-39 who received SNAP benefits. Credit of up to $2,400.
• TANF recipients: Long-term TANF recipients may generate credits of up to $9,000 over two years.
• Designated community residents: Individuals aged 18-39 living in Empowerment Zones or Rural Renewal Counties. Credit of up to $2,400.
• Vocational rehabilitation referrals: Individuals referred by state vocational rehabilitation agencies or VA rehabilitation programs. Credit of up to $2,400.
• Ex-felons: Individuals hired within one year of conviction or release. Credit of up to $2,400.
• SSI recipients: Individuals receiving Supplemental Security Income. Credit of up to $2,400.
• Summer youth employees: Individuals aged 16-17 living in Empowerment Zones who work during summer months. Credit of up to $1,200.
• Long-term unemployment recipients: Individuals unemployed for 27 or more consecutive weeks who received unemployment compensation. Credit of up to $2,400.

Credit Amounts

The standard WOTC credit is 40% of the first $6,000 in qualified wages (maximum $2,400 per employee) for employees who work at least 400 hours. For employees who work 120-399 hours, a reduced credit of 25% of wages (maximum $1,500) applies.

Higher credit amounts apply to certain groups:

• Disabled veterans: Up to $9,600 (40% of first $24,000 in wages)
• Long-term TANF recipients: Up to $9,000 (second-year credit available)
• Unemployed veterans (6+ months): Up to $5,600 (40% of first $14,000 in wages)

How to Apply in Texas

Step 1: Screen New Hires

During the hiring process, have applicants complete IRS Form 8850 (Pre-Screening Notice and Certification Request) and ETA Form 9061 or 9062. These forms help determine whether the applicant belongs to a qualifying target group.

Step 2: Submit to TWC Within 28 Days

Submit the completed Form 8850 to the Texas Workforce Commission within 28 calendar days of the employee's start date. TWC accepts submissions electronically, by mail, or by fax. Electronic submission is recommended for faster processing.

Step 3: Receive Certification

TWC reviews the submission and issues a certification or denial. If certified, the employer can claim the credit. Keep the certification documentation for your tax records.

Step 4: Claim the Credit

Report the WOTC on IRS Form 5884 (Work Opportunity Credit) as part of your federal income tax return. The credit reduces your federal tax liability.

WOTC for Texas Businesses: Special Considerations

• No state income tax: Texas has no state income tax, so WOTC is a federal credit only. However, the credit reduces federal tax liability, which benefits all Texas employers.
• High-hiring industries: Texas businesses in hospitality, retail, manufacturing, construction, and healthcare hire frequently and may have a higher proportion of WOTC-eligible candidates.
• Military communities: Texas's large military presence means veteran hiring is common. WOTC veteran credits are among the highest available. Veteran business programs guide.

Layering WOTC with Other Programs

• Skills Development Fund: Combine WOTC hiring credits with state workforce training grants. Skills Development Fund guide.
• On-the-Job Training (WIOA): Workforce boards may reimburse training costs for the same employees who generate WOTC credits.
• Federal Bonding Program: Free fidelity bonds for hard-to-place job seekers, complementing WOTC for ex-felon hires.

Find Programs That May Fit Your Business

WOTC is one of many programs that can reduce costs for Texas employers. Grants, other tax credits, SBA loans, and procurement certifications may also apply.

Not sure which programs may fit your business? Our free screening report checks your business against 150+ verified programs — grants, tax credits, loans, and incentives — and shows you which ones may match. Start your free screening →