About this programme
The Work Opportunity Tax Credit (WOTC) is a federal general business credit under section 51 of the Internal Revenue Code, jointly administered by the IRS and the U.S. Department of Labor (through state workforce agencies). It rewards employers for hiring individuals from ten targeted groups who face significant barriers to employment.
The credit is not a grant or a cash payment — it reduces the employer's federal income tax liability (or, for tax-exempt organisations hiring qualified veterans, offsets the employer's share of Social Security tax). Certification of a new hire's target-group membership is handled by the State Workforce Agency, not the IRS.
Congress last extended WOTC through December 31, 2025 under Section 113 of the Consolidated Appropriations Act, 2021 (P.L. 116-260). The credit does not apply to employees who begin work after that date, and as of this writing Congress has not passed a further extension — the IRS has formally noted that Form 8850, the pre-screening and certification request form, is no longer in use as a result. CapEasy tracks this record as cancelled-pending-relaunch: employers cannot currently start a new WOTC certification, but the programme has lapsed and been retroactively reinstated by Congress before, so a relaunch (potentially retroactive) is possible.
How it works
For taxable employers, the credit is generally 40% of up to $6,000 in first-year wages paid to a qualifying employee who works at least 400 hours — a maximum credit of $2,400 per qualifying hire. A reduced 25% rate applies where the employee worked between 120 and 399 hours; below 120 hours, no credit applies.
For qualified veterans, the wage base used to compute the credit can be as high as $24,000, depending on the veteran sub-category (e.g. service-connected disability, length of unemployment before hire).
The credit cannot be claimed for rehired employees. Taxable employers claim it on Form 5884 (Work Opportunity Credit), which flows into Form 3800 (General Business Credit) on the employer's income tax return; the credit cannot exceed the employer's income tax liability, though unused credit can be carried back one year and forward up to 20 years.
Tax-exempt organisations may claim WOTC only for hiring qualified veterans, using Form 5884-C, and the credit is limited to the employer's share of Social Security tax rather than income tax.
Who can apply
The employer must hire an individual who is certified by the State Workforce Agency as belonging to one of ten IRS-defined target groups: formerly incarcerated individuals / those with felony convictions; recipients of Temporary Assistance for Needy Families (TANF, IV-A); qualified veterans (including unemployed or disabled veterans); residents of Empowerment Zones or Rural Renewal Counties; individuals referred through vocational rehabilitation; SNAP (food stamp) recipient families; SSI recipients; long-term family assistance recipients; qualified summer youth employees (age 16-17, residing in an Empowerment Zone); and long-term unemployment recipients (unemployed for 27 or more consecutive weeks).
Certification of target-group status is done by the State Workforce Agency, not self-declared by the employer or employee — the employer must submit the pre-screening request before or on the day the job offer is made, and the state agency issues the certification (or, in some cases, a conditional certification via DOL-ETA Form 9062 through a partnering agency).
Because the credit has not applied to wages for employees who begin work after December 31, 2025, no new hire currently qualifies unless Congress extends or retroactively reinstates the programme.
How to apply
- Complete IRS Form 8850 (Pre-Screening Notice and Certification Request) on or before the day the job offer is made to the candidate — the form requires four dates: when information was provided, when the job was offered, when the person was hired, and when work started.
- Submit the completed Form 8850 to the State Workforce Agency — never to the IRS — within 28 days of the employee's start date.
- Wait for the State Workforce Agency to issue a certification (or work with a partnering agency that can issue a conditional certification on DOL-ETA Form 9062) confirming the employee's target-group status.
- Once certified, taxable employers compute the credit on Form 5884 and carry it to Form 3800 on the annual income tax return; tax-exempt employers use Form 5884-C for qualified-veteran hires against payroll (Social Security) tax.
Documents you’ll typically need
- IRS Form 8850 — Pre-Screening Notice and Certification Request for the Work Opportunity Credit
- DOL-ETA Form 9062 — Conditional Certification (where issued by a partnering agency)
- IRS Form 5884 — Work Opportunity Credit (taxable employers)
- IRS Form 3800 — General Business Credit
- IRS Form 5884-C — Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans
Frequently asked
Is the Work Opportunity Tax Credit still available right now?
No. WOTC was authorised through December 31, 2025 by the Consolidated Appropriations Act, 2021, and does not apply to employees who begin work after that date. The IRS has confirmed that Form 8850 is no longer in use as a result, and Congress has not yet passed a further extension.
Could WOTC come back for 2026 hires?
It's possible but not confirmed. WOTC has lapsed and been reauthorised by Congress multiple times in its history, sometimes retroactively covering hires made during the gap. Until new legislation passes, employers cannot rely on the credit applying to post-2025 hires.
Who actually certifies that a new hire qualifies for WOTC?
The State Workforce Agency, not the IRS or the employer. The employer submits Form 8850 within 28 days of the hire's start date, and the state agency reviews and certifies (or denies) the target-group claim.
How much was the credit worth when it was active?
Generally 40% of up to $6,000 in first-year wages (max $2,400) for employees working 400+ hours, or 25% for those working 120-399 hours. Qualified-veteran hires could draw on a wage base as high as $24,000 depending on the veteran category.
Can an employer claim WOTC for rehiring a former employee?
No. The credit explicitly excludes rehired employees — it applies only to new hires from the ten targeted groups.
Do tax-exempt organisations qualify for WOTC?
Only for hiring qualified veterans, and only against the employer's share of Social Security tax rather than income tax, using Form 5884-C instead of Form 5884.
Reviewed 2026-08-16. Programmes change — confirm current eligibility, amounts and deadlines on the official page before you apply. CapEasy is a private consultancy and is not affiliated with any government authority.