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.
| Source | What it says | Read |
|---|---|---|
| U.S. Department of Labor, Employment and Training Administration | “WOTC is authorized until December 31, 2025 (Section 113 of Division EE of P.L. 116-260 — Consolidated Appropriations Act, 2021).” | September 2, 2026 |
| Internal Revenue Service | “The Consolidated Appropriations Act, 2021 … authorized the extension of the WOTC until December 31, 2025.” Page last reviewed or updated July 20, 2026. | September 2, 2026 |
That is 244 days of lapse as this page is written, 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 still works
Wages paid during 2026 to somebody hired on or before December 31, 2025 can still generate credit, because eligibility attaches to the hire date rather than the wage date. If you certified people in 2025 and they are still on the payroll, that part of the credit is unaffected by the lapse.
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.
Work out which windows are still open
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.
| Hours worked | Rate | Wages counted | Maximum credit |
|---|---|---|---|
| Fewer than 120 | — | — | Nothing |
| At least 120, fewer than 400 | 25% | Up to $6,000 of first-year wages | $1,500 |
| 400 or more | 40% | Up to $6,000 of first-year wages | $2,400 |
| 400 or more, certain qualified veterans | 40% | Up to $24,000 of first-year wages | $9,600 |
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.
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.
What is actually at stake across a hiring year
What to do while it is lapsed
| Do | Because |
|---|---|
| Keep running Form 8850 at onboarding for every new hire | The 28-day window is the only irreversible part. Screening preserves the option; not screening closes it. |
| Ask your state workforce agency how it is handling submissions during the lapse | Practice differs. Some accept and hold, some decline to certify until the credit returns, and you want to know which before you rely on a filed form. |
| Keep 2025 certifications and wage records | Wages paid in 2026 to somebody hired on or before December 31, 2025 still count. That part is live. |
| Do not budget 2026 hires as credit-bearing | There is no credit to claim for them under current law, and forecasting one is how a finance team ends up with a hole. |
| Do not pay anybody a percentage of a credit that does not exist | Contingency-fee WOTC processing is priced on captured credit. During a lapse there is nothing to capture, and the screening itself is a form. |
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
Is the WOTC tax credit still available in 2026?
Not for new hires. The Work Opportunity Tax Credit was authorized only until December 31, 2025, and as of September 2, 2026 it has not been reauthorized. The Department of Labor page that administers the program and the IRS page that explains it both still carry the 2025 date, and the IRS page was last reviewed on July 20, 2026. Wages paid in 2026 to someone hired on or before December 31, 2025 can still generate credit.
Should I keep filing Form 8850 during the lapse?
Yes, and this is the practical point of the whole situation. The employer has 28 calendar days from an employee start date to submit Form 8850 to the designated local agency, and that window is not suspended because the credit is. If Congress revives the credit retroactively, hires you screened remain eligible and hires you did not are permanently outside the window. Ask your state workforce agency whether it is accepting and holding submissions or declining to certify until reauthorization.
How much is the WOTC worth per employee?
For the standard targeted groups, 40% of up to $6,000 of qualified first-year wages, a maximum of $2,400, where the employee works at least 400 hours. Where the employee works at least 120 but fewer than 400 hours the rate drops to 25%, a maximum of $1,500. Up to $24,000 of wages may be counted for certain qualified veterans, which at 40% works out to $9,600. Below 120 hours there is no credit.
How many hours does an employee need to work?
At least 120 for any credit at all, and 400 for the full rate. Four hundred hours is ten weeks of full-time work, or sixteen weeks for someone on twenty-five hours a week. The gap between the two bands is $900 per person for the standard groups, and for a high-turnover operation it is decided almost entirely by how many new hires are still there in week ten rather than by anything about the screening.
Who counts as a targeted group?
The IRS names ten: 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. Membership has to be certified by the state workforce agency before an employer claims anything; the employer cannot self-certify.
What happens to hires I already screened in 2026?
Their paperwork is in on time, which is the part you cannot fix later. Whether the certification is issued depends on how your state workforce agency is handling submissions during the lapse: some accept and hold them, others decline to certify until the credit is reauthorized. If a retroactive extension passes, those hires are the ones that can be claimed, because the 28-day filing requirement was met when it mattered.
Can I still claim WOTC for someone hired in 2025?
Yes, subject to the ordinary rules, because eligibility attaches to the hire date rather than the date wages are paid. Someone hired on or before December 31, 2025 and certified through the usual process can generate credit on qualified first-year wages, including wages paid during 2026. Keep the certifications and the wage records for those employees separate from your 2026 hiring, which is in a different position entirely.
Should I budget 2026 hires as credit-bearing?
No. Under current law there is no credit to claim for a 2026 hire, and building one into a hiring budget creates a hole if reauthorization does not arrive or arrives without retroactive effect. Treat any future extension as upside rather than as plan. The cost of preserving that upside is a form at onboarding, which is small enough that it does not need to appear in the budget at all.
The credit is uncertain. The cost per applicant is not.
Bring the roles you are filling and the markets you are filling them in. We will show you what applicant flow actually costs there, so the hiring plan stands up whether or not the credit comes back.
Book a DemoTwo neighbouring rules worth knowing before you budget a role: our guide to on-call pay laws explains when on-call hours count as hours worked for minimum wage and overtime, and our guide to pre-screening questions covers what you may and may not ask before a conditional offer.