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SD Welfare to Work Tax Credit (WtWTC)

The Welfare-to-Work Tax Credit (WtWTC) is available to employers who hire individuals who are long-term Temporary Assistance for Needy Families (TANF) Recipients.

NOTE: On October 4, 2004, the President signed into law the Working Families Tax-Relief Act of 2004 (P.L. 108-311). This legislation extends the WOTC program and the WtW tax credits, without change, for a two-year period through December 31, 2005. The reauthorization is retroactive to December 31, 2003 and applies to new hires that begin work for an employer after December 31, 2003 and before January 1, 2006.

The amount of the credit is 35% of qualifying first-year wages and 50% of qualifying second-year wages. For this purpose, "wages" include amounts excludable from the employee's gross income, including amounts received under accident and health plans, contributions by the employer to accident and health plans, amounts paid under certain educational assistance programs, and amounts paid under certain dependent care assistance programs.

Up to $10,000 of wages, per year (for a two-year period), paid to these individuals may be considered in determining the amount of the Welfare-to-Work tax credit. This results in a maximum credit of $3,500 the first year and $5,000 the second.

Eligible Individuals

Individuals must be certified by the Department of Social Services (DSS) as being a member of a family that:

      Has received family assistance (i.e., AFDC/TANF or a successor program) for at least 18 consecutive months ending on the hiring date; or

      Has received family assistance for a total of at least 18 months (whether or not the 18 months are consecutive) beginning after the day of enactment (i.e., August 5, 1997), and has a hiring date that is not more than two years after the end of the earliest 18-month period; or

      Whose AFDC/TANF eligibility expired under a Federal or State law after the day of enactment (i.e., August 5, 1997), for applicants hired within two years after their eligibility expired.

Minimum Employment Period

The Minimum Employment Period refers to the minimum number of hours and days an employer must retain the new hire to get the WtWTC. Before claiming the credit, an employer must employ an eligible individual for a minimum of 400 hours of service.

See Also:

Work Opportunity Tax Credit


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