Work Opportunity Tax Credit Through 2025

Work Opportunity Tax Credit Available Through 2025

Finding a job can be challenging—and for certain groups, it can be even harder. To encourage hiring, the Work Opportunity Tax Credit (WOTC) is available for employers who hire individuals from groups that have historically faced barriers to employment.

This federal tax credit is available until December 31, 2025.

Who Qualifies

Employers may be eligible for the WOTC when hiring individuals who are part of these groups:

• Long-term family assistance recipients
• Long-term unemployment recipients
• Supplemental Nutrition Assistance Program (SNAP) recipients
• Supplemental Security Income (SSI) recipients
• Recipients of Temporary Assistance for Needy Families (TANF)
• Formerly incarcerated individuals
• Qualified unemployed veterans (including disabled veterans)
• Designated community residents in empowerment zones or rural renewal counties
• Individuals referred through vocational rehabilitation programs
• Summer youth employees living in empowerment zones

Certification Requirement

To claim the credit, employers must first get certification that the new hire is a member of one of these groups. This is done by filing IRS Form 8850 with the employer’s state workforce agency within 28 days of the employee’s start date.

• Do not send Form 8850 to the IRS.
• Employers should contact their state workforce agency with any questions.

How to Claim the Credit

Once certified, employers can:

• Figure the credit using Form 5884 (Work Opportunity Credit)
• Claim it on Form 3800 (General Business Credit)

Special Rule for Tax-Exempt Organizations

Tax-exempt organizations can claim the credit only for hiring qualified veterans who begin work before 2026. These organizations claim the credit against payroll taxes using Form 5884-C.

Limitations

• For taxable businesses: The credit is limited to the employer’s income tax liability, with unused credit eligible for carry-back and carry-forward.
• For tax-exempt organizations: The credit is limited to the employer’s share of Social Security tax owed on qualifying wages.