Employer guideUpdated September 2026

WOTC Tax Credit: It Lapsed on December 31, 2025, and You Should Still Screen

The Work Opportunity Tax Credit expired on December 31, 2025 and has not been reauthorized. Read at source today, the Department of Labor page that administers it and the IRS page that explains it both still say the credit is authorized only until that date. An employer who hired somebody in 2026 cannot claim it right now. The reason to keep screening anyway is the deadline: Form 8850 must reach the state workforce agency within 28 calendar days of the start date, and if Congress revives the credit retroactively, as it has done after previous lapses, that window will already have closed on every hire you did not screen.

What the government pages actually say today

Two federal pages carry the operative statements, and they agree with each other.

Quoted from dol.gov/agencies/eta/wotc and the IRS Work Opportunity Tax Credit page, both read on September 2, 2026. Neither page announced an extension. The IRS page was reviewed six weeks before this one was written and still carries the 2025 date.

That is 271 days of lapse as of September 29, 2026, and it is the single most important thing about the credit right now. Every article telling you how to claim WOTC on a 2026 hire is describing something you cannot currently do, though the training-side money is unaffected: our workforce development grants page covers WIOA on-the-job training, which reimburses up to 75 percent of a new hire wage.

What the WOTC is, for anyone arriving cold

The Work Opportunity Tax Credit is a federal income tax credit for employers who hire people from ten groups that have historically had a hard time getting hired. It is claimed against the employer's tax, not the employee's; it is worth a percentage of first-year wages up to a cap that varies by group; and it depends entirely on a certification the employer requests from a state workforce agency within 28 calendar days of the person's start date. Everything else about it — the amounts, the hours thresholds, the paperwork — hangs off that certification.

The ten target groups, as the IRS names them

• Qualified IV-A recipient — someone in a family receiving Temporary Assistance for Needy Families
• Qualified veteran
• Qualified ex-felon
• Designated community resident — an 18-to-39-year-old living in an empowerment zone or rural renewal county
• Vocational rehabilitation referral
• Qualified summer youth employee
• Qualified SNAP benefits recipient
• Qualified Supplemental Security Income recipient
• Long-term family assistance recipient
• Qualified long-term unemployment recipient

Several of these describe a large share of a frontline applicant pool, which is why the credit matters more to a senior living operator or a warehouse than it does to an office employer — and why the screening habit is worth keeping even while the credit is lapsed.

The forms, in the order they happen

• IRS Form 8850, the Pre-Screening Notice and Certification Request, signed by the applicant on or before the day a job offer is made and filed with the state workforce agency within 28 calendar days of the start date.
• ETA Form 9061, the Individual Characteristics Form, filed alongside it — or ETA Form 9062 where the applicant already holds a conditional certification.
• IRS Form 5884 and Form 3800 with the business tax return, once the certification comes back. Tax-exempt employers hiring qualified veterans use Form 5884-C instead.

A qualified veteran is the group with the largest ceiling: up to $24,000 in wages can be taken into account for certain veterans, against $6,000 for most other groups. The section below sets out what that is worth once the hours thresholds are applied.

The 28-day trap

This is the part that decides whether a lapse costs you anything. Certification is not something you can do later. The employer has 28 calendar days from the new employee’s start date to submit Form 8850 to the designated local agency. That clock runs on its own schedule and takes no notice of whether the credit is currently authorized.

So consider what happens if Congress revives the credit retroactively, which is what has happened after previous lapses. On the day the extension passes, every 2026 hire you screened is still eligible, because the form went in inside its 28 days. Every 2026 hire you did not screen is gone, permanently, because you cannot go back and file inside a window that closed months ago. The employer who stopped screening in January did not save anything; they wrote off a credit that had not been decided yet.

What it is worth when it comes back

Worth knowing, because it is the number that decides whether screening is worth the friction it adds to onboarding.

Rates, hour thresholds and wage caps from the IRS Work Opportunity Tax Credit page, read September 2, 2026. The maximum credit column is our arithmetic from those rates and caps. The veteran figure applies to certain qualified veterans, not to all of them; the IRS page does not break the subcategories out.

The ten targeted groups, named as the IRS names them, are the qualified IV-A recipient, qualified veteran, qualified ex-felon, designated community resident, vocational rehabilitation referral, qualified summer youth employee, qualified SNAP benefits recipient, qualified SSI recipient, long-term family assistance recipient, and qualified long-term unemployment recipient. Certification of group membership has to come from the state workforce agency before anything is claimed.

The 400-hour line is where frontline employers lose most of it

Look again at the hours column, because it is doing more work than the group list. Four hundred hours is ten weeks of full-time work, or sixteen weeks for somebody on twenty-five hours. One hundred and twenty hours is three weeks full-time. Between those two lines sits a $900 difference per person, and below the lower one the credit is zero.

The credit is not the only federal instrument attached to a hire from a targeted group. The Federal Bonding Program covers a different risk — employee theft, for six months, at no cost — and the two stack rather than compete.

That makes the credit, for a high-turnover operation, less a hiring incentive than a retention one. Screening costs you a form at onboarding. Reaching hour 400 costs you a person who is still there in week ten. If your ninety-day attrition is heavy, a meaningful share of the people you certify will land in the 25% band or below it, and the difference between the number on the spreadsheet and the number on the return will be entirely explained by who stayed.

Tax credit for hiring felons: the WOTC ex-felon group

The federal tax credit for hiring felons is not a separate program. It is one of the ten WOTC target groups, the qualified ex-felon, and it rises and falls with the rest of the credit. That means it lapsed on December 31, 2025 along with everything else on this page, and as of September 23, 2026 the Department of Labor and IRS pages still carry that date and neither announces an extension. Bills introduced in this Congress to extend and change the credit, among them H.R. 6231 and S. 3265, were still in committee at their last recorded action.

When it is authorized, the rules for this group are narrow in one way that matters more than the dollar figure:

• Who qualifies. Someone convicted of a felony under any federal or state statute and hired not more than one year after the conviction or after release from prison for that felony. A person whose conviction or release was longer ago than that is not in the group, however hard they are finding it to get hired.
• What it is worth. The standard rate: 40% of up to $6,000 of first-year wages at 400 hours or more, a maximum of $2,400, or 25% at 120 to 399 hours.
• The paperwork. Form 8850 completed no later than the day the job offer is made, and filed with the state workforce agency within 28 calendar days of the start date. The state agency certifies group membership; the employer cannot.

So the one-year window does the filtering. Screening for it is the same Form 8850 every other group uses, which is why the advice below applies unchanged: keep screening, because a retroactive revival would reward only the hires whose forms went in on time. States vary in how they are treating those forms now; South Dakota, for example, is accepting new applications with 2026 hire dates but says final certifications or denials cannot be issued until the program is reauthorized.

The other federal instrument for this hire is still running. The Federal Bonding Program issues a free bond, with a $5,000 limit, covering the first six months of employment, and it does not depend on the WOTC. Before you screen for either, check your state and city rules on when you may ask about a conviction at all: our guide to ban the box laws by state covers that.

What to do while it is lapsed

Our reading of the situation as of September 2, 2026, not tax advice. The lapse could end retroactively, prospectively, or not at all, and that is a question for Congress rather than for us.

Other tax credits and hiring incentives for employers

With the WOTC lapsed, the hiring incentives that are still live are mostly not tax credits. Three are worth knowing about, and none of them depends on Congress reviving anything.

• WIOA on-the-job training reimbursement. Under 20 CFR 680.720, “employers may be reimbursed up to 50 percent of the wage rate of an OJT participant” to cover the extra cost of training and supervision, and up to 75 percent where the local workforce board applies the criteria in the next section of the regulation. It is arranged through your local workforce board or American Job Center before the hire, not claimed afterwards. Our workforce development grants page covers how to apply.
• The Federal Bonding Program. A free fidelity bond, $5,000 with no deductible, covering the first six months of employment for applicants whose background is a barrier to being hired, including justice-involved people, people in recovery from substance use disorders and people with poor credit records, per the program’s administrator working under contract with the Department of Labor. It protects against theft and dishonesty, and it stacks with the WOTC if the credit returns. Detail on our Federal Bonding Program page.
• State hiring credits. Many states run their own credits for hiring in particular areas or from particular groups. They are separate statutes from the WOTC and do not lapse with it, but the terms, caps and pre-hire paperwork differ state by state. Ask your state revenue or economic development agency before you rely on one.

For skilled trades, registered apprenticeship is often the route those programs fund; see apprenticeship recruiting. For veterans, the WOTC group with the largest wage ceiling, hiring veterans covers the programs that exist outside the credit.

Where our own numbers stop

We can tell you what it costs to put an ad in front of the people this credit exists to reach. Across the 891 campaigns in our 2026 social job advertising benchmark the median campaign delivered an applicant for $13.88, with caregiver and home care roles at $3.76 and warehouse and production at $9.83. Set the $2,400 maximum credit against a cost per applicant in that range and the arithmetic is obviously favorable — which is exactly why it is worth being precise that there is currently no credit, rather than quietly assuming there will be.

What we have no data on at all is certification rates, how many of our customers’ hires fall into a targeted group, or how many reach four hundred hours. We are not going to estimate any of those. The retention half of the question is the one we have written about honestly elsewhere, in first 90 days turnover and the turnover cost calculator, and it is the half that decides how much of this credit an employer actually collects when it returns.

For the eligibility side in detail — the ten targeted groups, the per-category wage limits, and what each hire is actually worth — see our guide to WOTC eligibility.

Frequently asked questions