What Is a Rural Renewal County? WOTC Value and Claim Steps

A rural renewal county is a non-metropolitan county that recorded a net population loss during both the 1990–1994 and 1995–1999 periods, as defined in 26 U.S.C. § 51.¹ The label exists for one practical reason: employers who hire residents of these counties between the ages of 18 and 39 can claim the Work Opportunity Tax Credit, worth up to $2,400 per qualifying employee.² Congress has authorized the WOTC through December 31, 2025, so availability for hires starting in 2026 depends on further legislation.

How the Designation Works

Two tests apply, and both must be met. The county has to sit outside any metropolitan statistical area as classified by the Office of Management and Budget, which rules out urban and suburban counties regardless of their population history. The county also has to have lost population during each of two separate five-year windows: 1990 through 1994, and 1995 through 1999.¹

The list does not refresh with new census data. The statute fixes the measurement to those two 1990s windows, and the roster of qualifying counties stays the same unless Congress amends the law. A county that has since stabilized or grown keeps its designation. A county that began declining only after 1999 is not on the list and cannot be added by population trend alone.

Which States Have Rural Renewal Counties

The IRS publishes the full county-level list in the instructions for Form 8850. Qualifying counties exist in more than two dozen states across every region.³

South: Alabama, Arkansas, Georgia, Kentucky, Louisiana, Mississippi, South Carolina, and Virginia.
Midwest: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, and South Dakota.
Northeast: Maine, New Hampshire, New York, and Pennsylvania.
West and Mountain: Alaska, Colorado, Montana, Nevada, New Mexico, Oklahoma, Oregon, Texas, and Wyoming.
Other: West Virginia.

State-level inclusion doesn’t mean every county qualifies. Some states have only one or two listed; Iowa, Kansas, and Nebraska each have dozens. Check the county tables in the Form 8850 instructions before relying on the designation.³

What the WOTC Is Worth for a Qualifying Hire

The Work Opportunity Tax Credit is a federal tax credit for employers who hire from certain target groups facing barriers to employment. Residents of rural renewal counties are one of those groups, grouped under the statute as “designated community residents.”² A credit reduces federal income tax dollar-for-dollar, which makes it more valuable than a deduction of the same size.

For a designated community resident, the credit equals 40% of up to $6,000 in qualified first-year wages, capping the credit at $2,400 per eligible hire. The 40% rate requires at least 400 hours of work during the first year.² A reduced 25% rate applies when the employee works at least 120 hours but fewer than 400, which caps the credit at $1,500. Below 120 hours, no credit is available.¹ Those thresholds matter for seasonal and part-time roles, where a hire can involve the same paperwork but produce no credit.

“Qualified first-year wages” means wages paid during the employee’s first 365 days of work, and only the first $6,000 counts for this target group. Higher caps apply to certain qualified veterans under separate WOTC categories and do not change the rural renewal county calculation.⁴

Congress most recently extended the WOTC through December 31, 2025, under the Consolidated Appropriations Act, 2021.² Without a new extension, the credit will not be available for employees who begin work after that date.

Who Counts as a Qualifying Resident

Two conditions have to be true on the date the employee starts work. The worker must be at least 18 and not yet 40. And the worker’s principal home must be physically located within one of the designated rural renewal counties.¹

Residency is not simply a checkbox at hire. Wages paid while the employee’s principal residence sits outside the qualifying county do not count toward the credit.¹ If a worker is hired while living in a qualifying county and moves away later in the year, only wages paid during the resident period count. Employers who miss this often overclaim.

Two other categories of workers are excluded by statute, no matter their age or address. Rehires never qualify: if the person worked for the business at any prior time, the credit is unavailable. Close family members of a majority owner are also excluded. For a corporation, that means relatives of anyone owning more than 50% of the stock; for a partnership or similar entity, the same rule covers relatives of anyone with more than a 50% capital or profits interest. The excluded relationships include children, siblings, parents, grandparents, in-laws, aunts, uncles, nieces, nephews, and dependents.¹

How to Claim the Credit

Certification starts with IRS Form 8850, the Pre-Screening Notice and Certification Request for the Work Opportunity Credit. The form captures the applicant’s name, address, date of birth, and target group information, and it has to be completed no later than the day the job offer is made.³ Form 8850 is submitted alongside ETA Form 9061, the Individual Characteristics Form from the Department of Labor, which gives the state workforce agency the background information needed to verify target group eligibility. An applicant who already holds an ETA Form 9062 Conditional Certification from a participating agency can use that in place of the 9061.

The forms go to the state workforce agency in the state where the business is located, and the deadline is firm: 28 calendar days from the employee’s start date.² Miss the window and the credit for that hire is lost. Most agencies accept electronic submissions; some still take paper. Employers who batch filings monthly can bump against the 28-day limit for anyone hired early in the cycle.

Keep residency proof with your own records even though it isn’t submitted. A driver’s license or utility bill showing an address within the qualifying county is far easier to collect at onboarding than to reconstruct months later during an audit.

With the state certification in hand, the credit itself is reported on IRS Form 5884, Work Opportunity Credit, which feeds into Form 3800, the General Business Credit. You have three years from the due date of the return to claim or amend a WOTC claim, so a credit missed in the original filing isn’t necessarily gone.⁵ The state certification must be obtained before you claim it; filing without that paper in your file invites trouble.

1
Office of the Law Revision Counsel. 26 USC 51 Amount of Credit
2
Internal Revenue Service. Work Opportunity Tax Credit
3
Internal Revenue Service. Instructions for Form 8850
4
Office of the Law Revision Counsel. 26 U.S. Code 51 – Amount of Credit
5
Internal Revenue Service. Instructions for Form 5884