Employer guideRead at source, 8 September 2026
WOTC Eligibility: Who Qualifies, What It Is Worth, and Why the Program Is Paused
The Work Opportunity Tax Credit is a federal credit for employers who hire from ten targeted groups — people who have faced sustained barriers to employment. For most qualifying hires it is worth 40% of up to $6,000 of first-year wages, a maximum of $2,400, rising to as much as $9,600 for certain veterans. But before you plan around it, the status matters more than the arithmetic: the program has been in hiatus since 1 January 2026, because its authorisation expired on 31 December 2025 and Congress has not renewed it. State workforce agencies are still taking paperwork for pre-2026 start dates, and cannot certify anyone hired since. This page covers who qualifies, what each group is worth, and what to do during the pause.
Status as of 8 September 2026: in hiatus
The Department of Labor's programme page still states that “WOTC is authorized until December 31, 2025 (Section 113 of Division EE of P.L. 116-260 — Consolidated Appropriations Act, 2021).” No extension has replaced that date. The District of Columbia's employment agency puts the consequence plainly: “Effective January 1, 2026, WOTC is in hiatus until a Congressional reauthorization occurs,” and for people starting work on or after 1 January 2026 the agency “may not issue any certifications or denials with respect to requests.”
This has happened before — the credit has lapsed and been restored repeatedly since 1996, often retroactively, so a hire made during a hiatus has historically still qualified once Congress acted. That is a pattern, not a guarantee. Treat any credit on a 2026 hire as unconfirmed until reauthorisation happens.
The ten targeted groups
Eligibility attaches to the person hired, not to the job or the employer. The IRS lists ten groups: people who are formerly incarcerated or previously convicted of a felony; recipients of state assistance under part A of title IV of the Social Security Act; veterans; residents of designated empowerment zones or rural renewal counties; people referred to an employer after completing a rehabilitation plan or programme; people whose families receive SNAP benefits; recipients of Supplemental Security Income; people whose families receive state assistance under part A of title IV; and people experiencing long-term unemployment.
Two practical consequences follow from that list. First, a large share of the frontline applicant pool is potentially in scope — SNAP recipients and the long-term unemployed are not rare categories. Second, you cannot know from a résumé; the screening happens on a form, on day one, with the candidate's own answers.
What each hire is worth
Two variables set the amount: which group the person belongs to, and how many hours they work in the first year.
| Hours worked in year one | Credit rate | Standard qualified wage cap | Maximum credit |
|---|---|---|---|
| Fewer than 120 | None | — | $0 |
| 120 to 399 | 25% | $6,000 | $1,500 |
| 400 or more | 40% | $6,000 | $2,400 |
The IRS describes the headline case as “40% of up to $6,000 of wages” for an employee reaching 400 hours, with “a 25% rate applies to wages” in the 120–399 hour band. Veterans and long-term family assistance recipients sit on higher wage limits, set out in the instructions for Form 5884.
| Category | Qualified first-year wage limit | Maximum credit at 40% |
|---|---|---|
| Most targeted groups | $6,000 | $2,400 |
| Summer youth employee | $3,000 | $1,200 |
| Veteran on SNAP, or unemployed 4 weeks to under 6 months | $6,000 | $2,400 |
| Veteran with a service-connected disability, hired within 1 year of discharge | $12,000 | $4,800 |
| Veteran unemployed 6 months or more | $14,000 | $5,600 |
| Veteran with a service-connected disability, unemployed 6 months or more | $24,000 | $9,600 |
| Long-term family assistance recipient | $10,000 per year, first and second year | $4,000 year one, then 50% of year-two wages |
The Form 5884 instructions state the top figure as “$24,000 … for a qualified veteran certified as being entitled to compensation for a service-connected disability, and unemployed for a period or periods totaling at least 6 months,” and cap long-term family assistance recipients at “$10,000 per year.” Every one of those maxima assumes the employee reaches 400 hours; below that the 25% rate applies to the same wage limit.
The 400-hour threshold is the one to manage
The difference between 399 and 400 hours is the difference between $1,500 and $2,400 on the same hire. For part-time frontline roles that boundary is roughly ten weeks at 40 hours, or half a year at 15 — well inside the window where early turnover decides the outcome. If you are hiring at volume from eligible groups, the retention work in the first ninety days is worth more than the paperwork.
Estimate a hire
Pick the category and the expected hours to see what a single qualifying hire would be worth under the pre-hiatus rules. Nothing is sent or stored — this runs in your browser.
WOTC value estimator
How the claim actually works
The credit is not claimed by ticking a box on a tax return. It runs through a state workforce agency, and it is time-limited from day one.
Screen on or before the day the offer is made
IRS Form 8850 is the pre-screening notice, and it is completed by the candidate. It cannot be used to decide whether to hire someone — the targeted-group categories overlap heavily with protected characteristics and with the conviction-history rules that fair-chance ordinances govern. Screen everyone you hire, not a selected subset.
File within 28 days of the start date
The IRS requires Form 8850 to be submitted to the state workforce agency “no later than 28 days after the date that the job applicant Started the job.” This is the single most common reason otherwise valid credits are lost. It is a filing deadline, not a target.
Wait for certification, then claim
The state agency certifies or denies. Only certified hires go onto Form 5884 and into the general business credit. During the current hiatus, agencies are not issuing certifications for 2026 start dates at all.
What to do during the hiatus
Keep screening. Every previous lapse has been resolved with retroactive effect. If reauthorisation follows the same pattern, the employers who kept collecting signed Form 8850s on day one will be able to file; the ones who stopped will have missed a 28-day window that cannot be reopened.
Do not budget for it. A credit that depends on an act of Congress is not a line in a hiring plan. If the economics of a role only work with WOTC attached, they do not work.
Keep the paperwork retrievable. Signed forms, start dates, hours worked and wages paid, filed by hire. Reconstructing hours a year later for a workforce that has turned over is where retroactive claims die.
Check state credits. Several states run their own hiring incentives for similar populations, and those are unaffected by the federal lapse.
What this page cannot do
It cannot tell you whether a specific candidate is certifiable — only the state workforce agency does that, from the candidate's own answers on Form 8850. It cannot substitute for tax advice on how the credit interacts with your other general business credits or with a loss year. And it cannot predict Congress.
What is within your control is the pipeline the credit sits on top of. Our guides to the candidate pipeline and to the WOTC tax credit cover the wider picture.
Frequently asked questions
Who is eligible for the Work Opportunity Tax Credit?
The IRS lists ten targeted groups: people formerly incarcerated or previously convicted of a felony, recipients of state assistance under part A of title IV of the Social Security Act, veterans, residents of designated empowerment zones or rural renewal counties, people referred after completing a rehabilitation plan, people whose families receive SNAP benefits, Supplemental Security Income recipients, people whose families receive part A title IV state assistance, and people experiencing long-term unemployment. Eligibility attaches to the individual hired, not to the role or the employer.
Is WOTC still available in 2026?
Not currently. The programme's authorisation ran to 31 December 2025 and has not been renewed, so it entered a hiatus on 1 January 2026. State workforce agencies may not issue certifications or denials for people who started work on or after that date. The credit has lapsed and been restored several times since 1996, often retroactively, but no reauthorisation has been enacted as of 8 September 2026.
How much is the Work Opportunity Tax Credit worth?
For most targeted groups the credit is 40% of up to $6,000 of first-year wages, a maximum of $2,400, for an employee who works at least 400 hours. Between 120 and 399 hours the rate falls to 25%, a maximum of $1,500. Below 120 hours there is no credit. Veteran categories carry higher wage limits — $12,000, $14,000 or $24,000 depending on disability status and length of unemployment — producing maximum credits of $4,800, $5,600 and $9,600 respectively.
What is IRS Form 8850 and when is it due?
Form 8850 is the pre-screening notice and certification request, completed by the job applicant. The IRS requires it to be submitted to the state workforce agency no later than 28 days after the date the applicant started the job. Missing that deadline forfeits the credit for that hire regardless of whether the person qualifies.
Should employers keep screening during the hiatus?
Most advisers say yes, on the basis that previous lapses were resolved retroactively. Because the 28-day filing window runs from the start date and cannot be reopened later, an employer who stops collecting signed forms will have no way to claim for 2026 hires if the credit is restored retroactively. Screening costs little; a missed window cannot be recovered.
Can WOTC screening be used to decide who to hire?
No. The pre-screening form is a certification request, not a selection tool, and the targeted-group categories overlap with protected characteristics and with conviction history, which many state and local fair-chance laws restrict. Screen every person you hire on the same basis rather than screening or favouring a subset.
How many hours must an employee work to qualify?
At least 120 hours in the first year for any credit at all, and at least 400 hours for the full 40% rate. The gap between the two bands is $900 on a standard hire, which makes early retention rather than paperwork the main determinant of what the credit is actually worth.
A hiring credit is a discount on a hire you already made.
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