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Bringing disadvantaged employees aboard has never been so rewarding--and we're not just talking about the tax credits you'll get.

This story appears in the April 2003 issue of Entrepreneur. Subscribe »

If you're thinking about adding staff, don't neglect the tax consequences of your plans. Two tax credit opportunities, for example, could provide some important savings and help defray the costs of keeping an employee on your payroll. These credits were extended through 2003 by the Job Creation and Worker Assistance Act of 2002.

The first type of tax opportunity is the work opportunity credit. It lets employers claim a credit equal to 40 percent of the first $6,000 of qualified wages, or a maximum of $2,400, during an employee's first year of employment. This applies to employees who work at least 400 hours during the year and belong to certain disadvantaged groups, such as qualified summer youth employees, families receiving food stamps, qualified veterans and persons receiving certain Supplemental Security Income benefits. (For a complete list, go to and type "work opportunity credit" in the search bar.) If the employee works less than 400 hours, but at least 120 hours, the credit is reduced to 25 percent of qualified wages. (No credit is available for employees working less than 120 hours in the year.)

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