Is the Work Opportunity Tax Credit still available?

What it is

The Work Opportunity Tax Credit rewards employers that hire people from targeted groups, including certain veterans, recipients of Supplemental Nutrition Assistance Program (SNAP) or Temporary Assistance for Needy Families (TANF) benefits, ex-felons, designated community residents, vocational rehabilitation referrals, summer youth employees, Supplemental Security Income recipients, and long-term unemployment recipients.

The credit is authorized only for workers who begin work before a statutory end date. That date has passed. This page explains what still qualifies and what employers are doing while Congress considers an extension.

The credit applies to wages paid by taxable employers and, in limited form, to certain tax-exempt employers hiring qualified veterans, who claim it against payroll taxes on Form 5884-C.

What the law says

IRC §51(a) sets the credit at 40% of qualified first-year wages. For most groups, qualified wages are capped at $6,000, so the credit is up to $2,400 per worker. Higher wage caps apply to certain veterans (up to $24,000 of wages, for a credit of up to $9,600), and long-term TANF recipients can generate up to $9,000 over two years. Under §51(i)(3), the rate drops to 25% if the worker performs fewer than 400 hours, and no credit is allowed below 120 hours.

IRC §51(c)(4) provides that wages do not include amounts paid to an individual who begins work for the employer after December 31, 2025. As of September 17, 2026, we have not found enacted legislation that extends this date; bills have been introduced. Check for new law before you file.

Requirements and tests

For each worker, all of the following must be met:

• The worker is a member of a targeted group, confirmed by a certification from the state workforce agency.
• The employer completes Form 8850 with the worker on or before the job offer and submits it to the state agency within 28 days after the worker begins work, as required by §51(d)(13).
• The worker began work on or before December 31, 2025 under current law.
• The worker performs at least 120 hours of service, and the employer is not related to the worker.
• The credit is claimed on Form 5884 and is part of the general business credit.
• Under §280C(a), the employer's wage deduction is reduced by the credit.

How it works

For a qualifying 2025 hire, wages paid during the worker's first year of employment, including wages paid in 2026, can count toward the credit, up to the wage cap. The employer claims the credit for the tax year in which those wages are paid.

For 2026 hires, the credit is $0 under current law. Many employers and state agencies continue to collect and submit Form 8850 within 28 days, so that the certification request is timely if Congress extends the credit retroactively, as it has after earlier lapses. A late Form 8850 generally cannot be fixed later.

State workforce agencies decide certifications. Some continued to accept Form 8850 submissions for 2026 hires during the lapse, while noting that certification depends on reauthorization; check your state agency's current instructions before relying on any submission.

Risks and IRS scrutiny

Most disallowed claims come from missing or late Form 8850 filings, missing state certifications, workers who did not reach 120 or 400 hours, or related-party hires. Keep signed forms, submission confirmations, certification letters, and hours records. Be cautious of vendors that promise credits for 2026 hires under current law.

If Congress extends the credit, the new law will control which hires qualify and whether any special filing deadlines apply for workers hired during the lapse. Past extensions have included transition relief, but that cannot be assumed.

Who it is not for

This credit is not available under current law for workers who start in 2026. It is also not for employers who did not file Form 8850 within 28 days, who hire relatives, or who cannot track hours and wages by worker.

Employers that hired in 2026 should also avoid counting the credit in budgets or pricing until a law is enacted, since the amount under current law is zero.

How ebotCPA helps

We review your 2025 hires for timely Form 8850 filings and certifications, compute the credit and the §280C(a) wage-deduction reduction, and set up a screening process for 2026 hires so you are ready if the law changes.

Book a $497 Case Analysis to have Ebot Mbi, CPA, EA review your facts before you act.

Primary sources

1. 26 U.S.C. §51(a) and (c)(4). Work opportunity credit.

   “…shall not include any amount paid or incurred to an individual who begins work for the employer after December 31, 2025.”

   Sets the 40% credit and ends it for workers who begin work after December 31, 2025.

2. 26 U.S.C. §51(d)(13). Certification and 28-day filing.

   “not later than the 28th day after the individual begins work for the employer, the employer submits such notice”

   Requires the pre-screening notice to be submitted to the state agency within 28 days.

3. 26 U.S.C. §51(i)(3). Minimum employment period.

   “No wages shall be taken into account under subsection (a) with respect to any individual unless such individual has performed at least 120 hours of service for the employer.”

   Sets the 120-hour minimum and the 25% rate below 400 hours.

4. 26 U.S.C. §280C(a). Wage deduction reduced by credit.

   Reduces the deduction for wages by the amount of the work opportunity credit.

5. Form 8850 and instructions. Pre-Screening Notice and Certification Request.

   The form employers submit to the state workforce agency to request certification.

6. U.S. Department of Labor, Work Opportunity Tax Credit. Program authorization and state agency process.

   States the program authorization under P.L. 116-260 through December 31, 2025.

7. IRM 4.23.1. Employment Tax Objectives, Organization, and IRM 4.23.

   Overview of how the IRS administers employment tax examinations.

Frequently asked questions