The Work Opportunity Tax Credit (WOTC) offers a valuable opportunity for businesses to gain financial benefits by hiring employees from targeted groups. Currently, the WOTC remains intact under the 2025 Tax Reconciliation Act. Still, it is slated to expire on December 31, 2025, based on existing legislation authorized under the Consolidated Appropriations Act of 2021 (U.S. Department of Labor, 2023).
It’s essential to stay informed about this potential expiration date, as it may change if Congress decides to extend or modify the program. If you’re considering hiring in industries such as food service, hospitality, construction, landscaping, healthcare, or beauty, being aware of this deadline will help you take full advantage of the credit for new employees. Planning ahead can ensure that you maximize the benefits available through the WOTC.
1. What Is WOTC—and Why Small Business
WOTC offers a valuable tool for employers hiring individuals from specific “targeted groups,” including veterans, long-term unemployed individuals, and those receiving public assistance like SNAP or SSI.
For eligible hires working at least 120 hours, businesses may claim:
- 25% of first-year wages (120–399 hours)
- 40% of first-year wages (400+ hours)
Small businesses can typically earn around $2,400 per hire, with credits up to $9,600 for qualified veterans (IRS, 2023).
2. Why WOTC Might Expire—Or Be Renewed
Currently authorized through December 31, 2025, WOTC’s future depends on Congressional renewal. Legislation such as H.R. 1177 has been introduced to extend the credit.
WOTC’s future depends on Congressional action, with bipartisan support shown in bills like H.R. 1177.
3. How Businesses Can Maximize WOTC
Steps to claim WOTC:
- Pre-screen with IRS Form 8850 within 28 days of hire.
- Obtain certification from your state workforce agency.
- File IRS Form 5884 (or Form 5884-C for nonprofits hiring veterans).
Key rules:
- Minimum 120 hours for a 25% credit; 400+ hours earns 40%.
- Credits can’t be double-claimed with other employment credits.
- Unused WOTC can be carried back 1 year or forward up to 20 years.
4. What WOTC’s Expiration Means for Employers and Employees
Employers:
If WOTC is not renewed, no credits will be available for hires made after December 31, 2025. Employers must still submit certification forms within 28 days of each hire to remain eligible for credits prior to expiration.
Employees:
WOTC encourages employers to hire from targeted groups, such as veterans, long-term unemployed individuals, and SNAP/SSI recipients, by providing tax credits. If the program expires on December 31, 2025, employers may face reduced incentives to hire from these groups, though the impact on job opportunities is uncertain. Stay informed about potential extensions, such as H.R. 1177, which proposes to enhance and extend WOTC.
5. Why WOTC Still Matters Under the 2025 Tax Plan
The 2025 Tax Reconciliation Act did not modify WOTC. While it expanded Section 179 expensing and bonus depreciation, WOTC remains a unique, hiring-focused incentive—particularly useful in industries with high turnover or part-time staffing.
6. What Needs to Happen for WOTC to Continue After 2025
- Temporary Extension: Congress could renew the credit short term.
- Permanent Authorization: WOTC could be codified into tax law.
- Program Expansion: Future legislation might broaden eligibility or raise the credit cap.
Small businesses should monitor these developments to stay ahead of potential changes.
7. FAQs
- Are non-profits eligible? Yes—for hiring qualified veterans only.
- What if an employee quits before 120 hours? No credit can be claimed.
- Can I claim both WOTC and the Child & Dependent Care Credit? Yes—if expenses are not double-counted.
- What records should I keep? IRS Form 8850, state certifications, payroll records—keep for at least 4 years (IRS, 2023).
- What is H.R. 1177? H.R. 1177, introduced February 10, 2025, proposes to extend and enhance WOTC but is not yet enacted.
How Worksite Can Help
At Worksite, we make WOTC management simple:
- Automated screening and timely Form 8850 submissions
- Payroll tracking for qualifying hours and wages
- Audit-ready documentation and expert support
Whether you’re hiring seasonally or building a full-time team, Worksite handles the paperwork so you can focus on growth.
Final Thought
WOTC is a powerful, yet time-sensitive opportunity for small businesses to save on hiring costs. With its possible expiration looming, now is the time to act. Taking advantage of current benefits and staying informed on legislative updates ensures your business remains competitive, compliant, and inclusive.
