The Work Opportunity Tax Credit (WOTC) is a federal tax credit for employers who hire people from certain targeted groups, generally worth up to $2,400 per eligible hire (as of October 2026). The IRS says it's authorized only for individuals who began work on or before December 31, 2025, and its page for Form 8850, the WOTC screening form, now says the form is no longer in use.
If you've been told to 'screen every new hire for WOTC', check the date on that advice. The credit hasn't been renewed on the IRS and Department of Labor pages, which both still say it's authorized until December 31, 2025. Here's what that means for hires before and after that date, and what you can still claim.
Where WOTC stands in October 2026
| Question | Answer from the IRS and DOL pages |
|---|---|
| Is WOTC authorized? | Until December 31, 2025, under the Consolidated Appropriations Act, 2021 |
| Which hires qualify? | Individuals who began work on or before December 31, 2025 |
| Is Form 8850 still used? | The IRS About Form 8850 page says it's no longer in use (notice dated March 19, 2026) |
| How is the credit claimed? | On Form 5884, for qualified first and second-year wages |
Nothing on either page says the credit has been extended, so for someone who started on or after January 1, 2026, there's no WOTC to claim unless the law changes. If it does, the IRS page is where it'll show first.
How much the credit is worth
The IRS says the credit is generally 40% of up to $6,000 of wages paid in the employee's first year, if they're certified as a member of a targeted group and work at least 400 hours for you. That's why the usual maximum is $2,400. A 25% rate applies if they work at least 120 but fewer than 400 hours. For certain qualified veterans, up to $24,000 of wages can count.
- You can't claim it for employees you rehire.
- Taxable employers can generally carry unused credit back one year and forward 20 years.
- Tax-exempt employers can claim it only against payroll taxes, and only for qualified veterans (Form 5884-C).
- You can claim other wage-based credits for the same person, but not on the same wages.
Who counted as a targeted group
The IRS lists the targeted groups under section 51 of the tax code. They include qualified veterans, people formerly incarcerated or previously convicted of a felony, recipients of TANF assistance, families receiving SNAP, recipients of supplemental security income, people referred after a rehabilitation program, residents of empowerment zones or rural renewal counties, summer youth employees and people experiencing long-term unemployment.
| Targeted group | IRS definition (summary) |
|---|---|
| TANF recipient | Family received TANF assistance for any 9 months in the 18 months ending on the hiring date |
| SNAP recipient | Family received SNAP for at least 3 months in the 15 months ending on the hiring date |
| Qualified veteran | Includes veterans with a service-connected disability hired within 1 year of discharge, or unemployed for 6 months or more in the past year |
| Qualified ex-felon | Hired within a year of a felony conviction or release from prison for it |
| Designated community resident | Aged 18 to 39 and living in an empowerment zone or rural renewal county |
| Vocational rehabilitation referral | A person with a disability referred under a state plan, Ticket to Work or a Veterans Affairs program |
Check the full definitions on the IRS page before relying on any of these for a 2025 hire, because the qualifying periods are counted back from the hiring date, not the date you claim.
What you can still do now
- List anyone you hired on or before December 31, 2025, who was certified by your state workforce agency.
- Check their hours, because the 400-hour and 120-hour tests set the rate.
- Work out the qualified first-year (and, for some groups, second-year) wages.
- Claim the credit on Form 5884 with your business return, and record any carryback or carryforward.
- For hires from January 1, 2026, don't promise WOTC savings in your hiring plans unless the law changes.
If a payroll or WOTC screening provider is still charging you to screen 2026 hires, ask them what they're screening for. A good payroll provider should be able to answer that in one line.
WOTC alongside other credits
The IRS says the wages you use to calculate WOTC generally can't be used for another wage-based credit, but you may be able to claim more than one credit for the same employee, as long as different wages go into each. It names examples such as the Employee Retention Credit and the Empowerment Zone Employment Credit. If you're amending older returns or reviewing past credits, ask your adviser to check the wages haven't been counted twice.
How the process used to work
For hires who qualified, the employer and applicant completed Form 8850 on or before the day the job offer was made, and the employer had 28 calendar days from the start date to send it to the designated local agency in the state where the employee works. The Department of Labor's state agencies then certified the person as a member of a targeted group. That deadline is why WOTC was usually built into onboarding, and why some recruiting software added WOTC screening as a feature.
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My verdict
WOTC was a useful credit for small businesses hiring from the targeted groups, but as of October 2026 the official pages say it covers only people who started by December 31, 2025. Claim what you're owed for those hires, stop paying for screening that can't produce a credit, and check the IRS page before your next big hiring round in case Congress brings it back.
Frequently asked questions
Is the Work Opportunity Tax Credit still available in 2026?
Not for new hires, according to the IRS and DOL pages. WOTC is authorized only for individuals who began work on or before December 31, 2025.
Is Form 8850 still used?
The IRS About Form 8850 page says the form is no longer in use, with a notice dated March 19, 2026.
How much is the WOTC worth?
Generally 40% of up to $6,000 of first-year wages, so up to $2,400 per employee, and more for certain qualified veterans.
How do I claim the WOTC?
On Form 5884, which reports qualified first and second-year wages paid to certified targeted group employees.
Can I claim WOTC for a rehired employee?
No. The IRS says an employer can't claim the WOTC for employees who are rehired.
Can tax-exempt employers claim WOTC?
Only against payroll taxes, and only for wages paid to members of the qualified veteran group.
