Work Opportunity Tax Credit

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DEFINITION of 'Work Opportunity Tax Credit'

A separate, nonrefundable credit that is part of the general business credit. The work opportunity tax credit is designed to encourage employers to hire workers from certain minority groups with higher-than-average unemployment rates. This credit can be for as much as 40\% of the qualified wages you pay to workers in this category in the first year.

BREAKING DOWN 'Work Opportunity Tax Credit'

The work opportunity tax credit is figured on Form 5884, and is aggregated with all of the other business credits. There are several targeted groups of workers that will qualify their employers for this credit, including veterans, ex-felons, high-risk youth, food stamp recipients, SSI recipients and several other groups.

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