Tax Breaks for Hiring Felons

Hiring a convicted felon may accomplish more than just giving someone a second chance. In fact, by employing someone who was recently convicted of a felony or released from incarceration for a felony conviction you may qualify for a tax break. Under the federal Work Opportunity Tax Credit, or WOTC, program, employers that hire convicted felons receive an incentive for doing so in the form of a tax credit.

The WOTC program is part of the broader 1996 Small Business Job Protection Act. In order to qualify for the credit, the employer must hire someone who was released or convicted within the past year. The amount of the credit will depend on the employee's wages during the first year of employment up to a cap of $6,000 in wages. For employees who work between 120 and 400 hours during the year, the employer will receive a credit equal to 25 percent of the qualifying wages. For employees who worked more than 400 hours, the employer receives a credit equal to 40 percent of the qualifying wages.

Along with the federal WOTC program, numerous states also offer a similar program that provides employers with a credit toward their state tax obligation.