Soak up summer hiring credits

Summertime is coming, when the tax credits are easy.

Strategy: Hire youths eligible for the “summertime” version of the Work Opportunity Tax Credit (WOTC). It can be claimed for workers age 16 or 17 who reside in an empowerment zone or enterprise community.

The new Tax Cuts and Jobs Act (TCJA) doesn’t touch the WOTC.

Here’s the whole story: The summertime credit is different than the regular WOTC. It applies only to services performed between May 1 and Sept. 15. Also, unlike the regular WOTC, the credit amount generally equals 25% of the worker’s first-year wages up to $3,000, for a maximum credit of $750 per worker. (The maximum regular WOTC is generally $2,400 per qualified worker.)

But the summertime credit is boosted to 40% of a worker’s first-year wages, and up to $3,000 if the youth works 400 hours or more. In this case, the maximum credit per worker is $1,200. For instance, if your business hires five eligible summertime workers and pays each $3,000 or more, it can collect a cool $6,000 in credits.

However, if your company employed a youth prior to the specified summertime period, it can’t claim the credit for that worker.

Tip: Factor tax credits into your summer hiring decisions.