Indian Employment Credit (Section 45A)
Internal Revenue Service
20% of qualifying wages
Credit for hiring enrolled tribal members
A federal tax credit for businesses that employ enrolled members of an Indian tribe (or their spouses) who live on or near a reservation and whose wages and health insurance costs are within specified thresholds. Equals 20% of qualified wages and employee health insurance costs above a base-year 1993 amount. The credit has been repeatedly extended by Congress and was last extended through December 31, 2025 by the Tax Relief for American Families and Workers Act of 2024. VERIFY STATUS — may be lapsed or extended under OBBBA 2025.
- Funding type
- Tax Credit
- Level
- Federal
- Amount
- 20% of qualified wages and employee health insurance costs above 1993 base-year amounts; no stated annual dollar cap per employer
- Realistic amount
- Varies significantly — typically $2,000–$10,000 per qualifying employee per year depending on wages paid
- Deadline
- Annual — file with federal tax return (Form 8845). VERIFY 2026 reauthorization status before claiming.
- Status
- active
- States
- Nationwide
- Payment model
- tax offset
Who qualifies
- Employer must be any business entity (C-corp, S-corp, partnership, LLC, sole proprietor)
- Employee must be an enrolled member of an Indian tribe OR the spouse of an enrolled member
- Employee or spouse must have their principal place of abode on the reservation during the period of employment
- Employee's qualified wages must not exceed $35,000/year (adjusted for inflation — current threshold ~$50,000+; confirm per IRS Publication 954)
- Qualified wages means wages paid to the qualifying employee, excluding wages taken into account for the Work Opportunity Tax Credit (WOTC)
- Employer must have employed at least one qualifying employee in 1993 to establish the base-year comparison amount; new employers use $0 as baseline
- Credit was authorized through Dec 31, 2025 — confirm reauthorization before claiming for tax year 2026
What it covers
Eligible expenses
- Wages paid to enrolled tribal members (or spouses) who live on/near the reservation, up to the annual wage threshold
- Employer-paid health insurance premiums for qualifying employees
- Both wages and health insurance above the 1993 base-year amount for that employer
Ineligible expenses
- Wages for employees who do not live on or near the applicable Indian reservation
- Wages above the annual per-employee threshold (currently ~$50K+ adjusted)
- Wages already counted under the Work Opportunity Tax Credit (WOTC)
- Wages paid to tribal members who are not enrolled in a federally recognized tribe
- Wages paid in any tax year for which the credit has not been reauthorized by Congress
How to apply
-
1
Verify employee tribal enrollment and residency
Confirm each potential qualifying employee is an enrolled member of a federally recognized Indian tribe (or spouse) AND has their principal place of abode on or near the applicable reservation during employment. Tribal enrollment cards or documentation from the tribe serve as proof.
~1 hrs
-
2
Check reauthorization status for the tax year
The credit expires periodically and requires Congressional reauthorization. Confirm that the credit is authorized for the current tax year at IRS.gov or via a tax advisor before proceeding. Last confirmed extension: through Dec 31, 2025.
~0.5 hrs
-
3
Calculate qualified wages and health insurance
Total wages paid to qualifying employees plus employer-paid health insurance premiums. Wages must be under the annual threshold (~$50K+ adjusted). Subtract the 1993 base-year amount (or $0 for new employers). Multiply excess by 20%.
~2 hrs
-
4
Coordinate with WOTC to avoid double-counting
Wages used for the Work Opportunity Tax Credit (WOTC) cannot also be used for the Indian Employment Credit. Allocate wages between the two credits to maximize combined benefit — typically WOTC for new hires (first-year wages), Indian Employment Credit for ongoing employment.
~1 hrs
-
5
File Form 8845
Complete IRS Form 8845 (Indian Employment Credit) and attach to the business's federal income tax return. Credit flows through to Form 3800 (General Business Credit).
~1 hrs
Stack with WOTC: allocate first-year wages to WOTC (higher credit), then use Indian Employment Credit for ongoing wage years. Confirm annual reauthorization — this is an 'extender' credit that lapses and gets renewed unpredictably.
Deadline & timing
Historically extended annually or in multi-year packages. The Tax Relief for American Families and Workers Act of 2024 extended it through Dec 31, 2025. As of May 2026, Congress had not yet confirmed extension under OBBBA or standalone legislation. Check IRS.gov for latest extension status before filing.
Programs that stack well
Related programs
Last reviewed 2026. GrantCompass is an independent funding-discovery tool and is not affiliated with any government agency. Always confirm details on the official program page.