Are you expanding your workforce but struggling to find qualified candidates? If so, it may be time to look beyond your usual hiring pool. One powerful incentive is the Work Opportunity Tax Credit (WOTC), a federal program designed to encourage employers to hire job seekers who face barriers to employment.
But time is running out: unless Congress acts, the WOTC will expire on December 31, 2025.
Who qualifies under the WOTC?
The credit is available to employers that hire individuals from specific targeted groups identified by the IRS, including:
- Families receiving Temporary Assistance for Needy Families (TANF)
- Qualified veterans
- Formerly incarcerated individuals (ex-felons)
- Residents of designated communities
- Vocational rehabilitation referrals
- Summer youth employees
- Families receiving Supplemental Nutrition Assistance Program (SNAP) benefits
- Supplemental Security Income (SSI) recipients
- Long-term family assistance recipients
- Long-term unemployed individuals
To claim the credit, employers must submit IRS Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit) to their state workforce agency within 28 days of the employee’s first day of work.
Requirements and credit amounts
Employers must also meet service-hour and employment requirements. The WOTC generally isn’t available for rehired workers or family members of the employer.
Credit amounts vary depending on the employee’s targeted group. For most workers, the maximum credit is $2,400 per qualified new hire. However, the amount can be significantly higher:
- Up to $9,600 for certain veterans
- $4,000 for long-term family assistance recipients (plus up to $5,000 in year two)
- $1,200 for summer youth hires
Employers can apply unused credits against prior-year taxes (carryback one year) or future taxes (carryforward up to 20 years).
Why WOTC matters now
The recently passed One Big Beautiful Bill Act (OBBBA) made several business tax breaks permanent, such as the Qualified Business Income deduction and 100% bonus depreciation. Surprisingly, the WOTC wasn’t included.
While Congress has extended the program multiple times in the past, its future remains uncertain. Employers who want to benefit should take advantage of the credit while it’s still available.
Stay prepared
Whether the WOTC is extended or allowed to lapse, now is the time to evaluate your hiring strategy and maximize available tax incentives. We can help your business determine eligibility, file the necessary forms, and identify other credits and deductions to reduce your tax liability.
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