The Work Opportunity Tax Credit is a federal tax credit available to employers who hire individuals from certain target groups who have consistently faced significant barriers to employment. There are several ways construction companies can benefit from the Work Opportunity Tax Credit (WOTC) including:
- Tax Savings: The primary benefit of the WOTC is the potential for significant tax savings. Employers can earn a tax credit equal to a percentage of the eligible employee’s wages, with maximum credit amounts ranging from $2,400 to $9,600 per employee, depending on the target group.
- Offsetting Labor Costs: In the construction industry, labor costs can be substantial. By utilizing the WOTC, construction companies can offset some of these costs, making it more financially feasible to hire additional workers.
- Expanding Workforce: The WOTC encourages companies to hire individuals from target groups, such as veterans, ex-felons, long-term unemployed individuals, and others. This can help construction companies tap into a broader labor pool and find motivated employees who may have been overlooked otherwise. Note: There are some exclusions, such as rehired former employees, family members, and individuals with majority ownership in the business.
- Corporate Social Responsibility: Taking advantage of the WOTC aligns with corporate social responsibility initiatives by providing job opportunities to individuals who face employment barriers. This can enhance the company’s reputation and strengthen community relationships.
- Employee Retention Incentives: The WOTC incentivizes not just hiring but also retaining employees, as the credit amount can increase with the duration of the employee’s tenure. This can lead to better workforce stability and reduced turnover costs for construction companies.
By leveraging the WOTC, construction companies can not only reduce their tax liability but also contribute to workforce development and community support by providing opportunities to individuals who face barriers to employment.
Contact us with your questions about how construction companies can benefit from the Work Opportunity Tax Credit or for assistance in applying for and managing the WOTC.
