The Empowerment Zone Employment Credit lets eligible startups claim up to $3,000 per year for each employee who lives and works in a designated federal empowerment zone, reducing overall tax liability. Learn how Form 8844 works, which employers qualify, and the key steps founders must follow to accurately claim this credit on their startup tax return.
Visit our guide to Startup Tax Forms to find out more information about other IRS forms startups need.
Which startups are eligible to claim the Empowerment Zone Credit?
To be eligible for the Empowerment Zone Employment Credit, your startup must substantially provide all services within the Empowerment Zone. Your employee must also reside in the designated zone.
And that’s the problem for most startups. Even before the increase in remote working, it was rare for startups to operate in an Empowerment Zone (EZ) and their employees to live in an EZ. Very few startups can claim the credit.
Where are the Top Urban Designated Empowerment Zones?
As of tax year 2020, parts of these cities had Empowerment Zones. To emphasize, the whole city is not considered an Empowerment Zone, only small sections of it are. We only present the top urban cities here.
- Pulaski County, AR
- Tucson, AZ
- Fresno, CA
- Los Angeles, CA (city and county)
- Santa Ana, CA
- New Haven, CT
- Jacksonville, FL
- Miami/Dade County, FL
- Chicago, IL
- Gary/Hammond/East Chicago, IN
- Boston, MA
- Baltimore, MD
- Detroit, MI
- Minneapolis, MN
- St. Louis, MO/East St. Louis, IL
- Cumberland County, NJ
- New York, NY
- Syracuse, NY
- Yonkers, NY
- Cincinnati, OH
- Cleveland, OH
- Columbus, OH
- Oklahoma City, OK
- Philadelphia, PA/Camden, NJ
- Columbia/Sumter, SC
- Knoxville, TN
- El Paso, TX
- San Antonio, TX
- Norfolk/Portsmouth, VA
- Huntington, WV/Ironton, OH
Where are the Top Rural Designated Empowerment Zones?
There are also rural areas that offer the Empowerment Zone Credit, but are even more rarely found amongst startups with <100 FTEs:
- Desert Communities, CA (part of Riverside County)
- Southwest Georgia United, GA (part of Crisp County and all of Dooly County)
- Southernmost Illinois Delta, IL (parts of Alexander and Johnson Counties and all of Pulaski County)
- Kentucky Highlands, KY (part of Wayne County and all of Clinton and Jackson Counties)
- Aroostook County, ME (part of Aroostook County)
- Mid-Delta, MS (parts of Bolivar, Holmes, Humphreys, Leflore, Sunflower, and Washington Counties)
- Griggs-Steele, ND (part of Griggs County and all of Steele County)
- Oglala Sioux Tribe, SD (parts of Jackson and Bennett Counties and all of Shannon County)
- Middle Rio Grande FUTURO Communities, TX (parts of Dimmit, Maverick, Uvalde, and Zavala Counties)
- Rio Grande Valley, TX (parts of Cameron, Hidalgo, Starr, and Willacy Counties)
How Much Credit Will My Startup Receive for the Empowerment Zone Employment Credit?
Up to $3000 per qualified full-time employee.
How do I apply for the Empowerment Zone Employment Credit?
You can apply for the Empowerment Zone Employment Credit on form 8844 and 3800, which is a part of the 1120 C-Corporation Income Tax Return, due 4/15 every year and can be extended to 10/15 every year.
Where can I find more information aboutEmpowerment Zone Employment Credit?
If you would like more information on the Empowerment Zone Employment Credit, you can check out the Form 8844 section on the IRS website here.
