As of October 2026, the work opportunity tax credit is not available for anyone who starts work in 2026. The statute stops the credit for employees who begin work after December 31, 2025, and no law enacted so far in 2026, including the One Big Beautiful Bill Act, has extended it.
That does not wipe out the credit for 2025 hires. Wages paid in 2026 (and, for long-term TANF recipients, in 2027) to certified employees who started on or before December 31, 2025 still count, and unused credits still carry forward. This guide sets out the work opportunity tax credit 2026 position, the target groups, the credit amounts, the forms, and a worked example.
The WOTC has always been a temporary provision. Its end date sits in Internal Revenue Code section 51(c)(4), which excludes wages for any individual who "begins work for the employer after December 31, 2025." The last extension came in the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Division EE of P.L. 116-260), which moved the date from the end of 2020 to the end of 2025.
The IRS WOTC page, last updated in July 2026, still describes the credit as available for individuals "who begin work on or before December 31, 2025." In March 2026 the IRS went further and posted a notice that Form 8850 is no longer in use, explaining that "the work opportunity credit does not apply to employees who begin work for the employer after December 31, 2025."
The Congressional Research Service report on the WOTC (updated May 13, 2026) adds three useful points:
Two bills titled the Improve and Enhance the Work Opportunity Tax Credit Act (H.R. 1177 and S. 3265) were introduced in 2025, and as of October 2026 Congress.gov shows each one only as referred to committee.
Because section 51 has no start date for eligible hires, Congress can revive the credit simply by moving the end date, and the change reaches back to cover the gap. CRS notes that this has happened many times. The WOTC lapsed after December 31, 2013 and was restored in December 2014 by the Tax Increase Prevention Act of 2014. It lapsed again after 2014 and was restored in December 2015.
After the 2015 restoration, the IRS gave employers extra time to file their paperwork. IRS Notice 2016-22 treated employers as meeting the 28-day rule for certain 2015 and early 2016 hires if they submitted Form 8850 "no later than June 29, 2016." Nothing guarantees the same treatment next time, and no extension has passed as of October 2026.
A new hire generates a credit only if the state workforce agency certifies the person as a member of a targeted group. The IRS lists ten groups:
Only W-2 employees count. If you are unsure whether a worker is an employee at all, settle that first with a review of 1099 worker classification and hours rules.
Section 51 sets the credit at 40 percent of qualified first-year wages, up to a wage cap that depends on the target group. Two hour thresholds apply:
| Target group | Wage cap | Maximum credit |
|---|---|---|
| Most groups (TANF, SNAP, SSI, ex-felons, community residents, vocational rehab, long-term unemployed) | $6,000 | $2,400 |
| Summer youth | $3,000 | $1,200 |
| Veteran with service-connected disability, hired within 1 year of discharge | $12,000 | $4,800 |
| Veteran unemployed 6 months or more in the year before hire | $14,000 | $5,600 |
| Veteran with service-connected disability and unemployed 6 months or more | $24,000 | $9,600 |
| Long-term family assistance recipient | $10,000 per year for 2 years | $4,000 year 1 + $5,000 year 2 = $9,000 |
For long-term family assistance recipients, the second year is credited at 50 percent of up to $10,000 of second-year wages. Veterans who qualify only through SNAP or a shorter spell of unemployment use the standard $6,000 cap.
One more rule affects the tax math. Under section 280C(a), "no deduction shall be allowed" for the portion of wages equal to the work opportunity credit, so your wage deduction falls by the amount of the credit.
A retailer hired five certified employees in 2025, all of whom started on or before December 31, 2025. Their first-year wages run into 2026, which still counts because the cutoff is tied to the start date.
| Employee | Target group | First-year hours | First-year wages | Wage cap | Rate | Credit |
|---|---|---|---|---|---|---|
| A | SNAP recipient | 1,040 | $18,000 | $6,000 | 40% | $2,400 |
| B | Veteran unemployed 6+ months | 2,080 | $31,200 | $14,000 | 40% | $5,600 |
| C | Long-term unemployed | 320 | $4,800 | $6,000 | 25% | $1,200 |
| D | Ex-felon | 95 | $1,900 | $6,000 | none | $0 |
| E | Long-term TANF, year 1 | 1,600 | $22,000 | $10,000 | 40% | $4,000 |
First-year credits total $13,200. Employee C's wages sit below the cap, so the 25 percent rate applies to the full $4,800. Employee D left before reaching 120 hours, so the certification produces no credit.
If Employee E stays and earns $24,000 in the second year, the employer adds 50 percent of $10,000, or $5,000. Across both years, the class produces $18,200 of credit, and the employer's wage deduction falls by the same $18,200.
For hires through 2025, the employer and the new hire completed Form 8850, the Pre-Screening Notice and Certification Request, by the day of the job offer. The employer then sent it with ETA Form 9061 (or a conditional certification on ETA Form 9062) to the state workforce agency. Section 51(d)(13) requires submission "not later than the 28th day after the individual begins work for the employer." Miss that window and the hire generally cannot be certified.
For 2026 starts, the IRS now says Form 8850 is no longer in use, and states may not issue certifications while the credit is lapsed. Employers that want to be ready for a possible retroactive renewal can keep the screening facts on file at hire (start date, the information ETA Form 9061 asks for, and any agency letters) and ask their state workforce agency whether it is still accepting requests. Folding that into a regular payroll compliance checklist keeps it from slipping. If Congress acts, watch for IRS transition relief similar to Notice 2016-22.
Once the state certifies a hire, a taxable employer figures the credit on Form 5884, Work Opportunity Credit, which covers both qualified first-year and second-year wages. The result flows to Form 3800, so it is subject to the general business credit limits explained in our guide to claiming the general business credit on Form 3800. Unused credit can be carried back one year or forward up to 20 years.
The WOTC sits on Form 3800 next to other employer credits, such as the FICA tip credit on Form 8846 and the research credit covered in how small businesses can maximize R&D tax credits.
Tax-exempt organizations can claim the credit only for qualified veterans, and they take it against the employer share of Social Security tax on Form 5884-C. The IRS page limits this to "qualified veterans who begin work for the organization before 2026," so it follows the same cutoff.
The practical work this year falls into two buckets.
Finish the 2025 claims. Certified 2025 hires still produce credit on wages paid in 2026, and long-term TANF hires can produce second-year credit into 2027. Track each certified employee's hours and wages through the end of the first-year window, because the 120-hour and 400-hour tests decide the rate. Hiring-heavy businesses such as staffing firms feel this most, as covered in our note on accounting for staffing and recruiting agencies.
Do not budget for 2026 hires. Until a law extends section 51, a 2026 start produces no work opportunity credit. Leave it out of 2026 estimated tax and cash flow projections, and add it back only if an extension passes. Our list of common small business tax filing mistakes covers other credits and deductions worth rechecking before a return goes out.
If you are adjusting deposits or quarterly figures, the Form 941 guide for 2026 covers how employment taxes are reported.
Is the work opportunity tax credit available in 2026? Not for new hires. As of October 2026, the credit does not apply to anyone who begins work after December 31, 2025, and no 2026 law has extended it. Certified employees who started in 2025 or earlier still generate credit on their remaining qualified wages.
Did the One Big Beautiful Bill Act extend the WOTC? No. The Congressional Research Service states that P.L. 119-21 did not change the WOTC and that the lapse was unrelated to that law.
Can I claim the WOTC on 2026 wages paid to a 2025 hire? Yes, if the employee started on or before December 31, 2025 and was certified. The cutoff is based on the start date, so first-year wages that fall in 2026 still count, and long-term TANF second-year wages can run into 2027.
What is the maximum WOTC per employee? For most groups it is $2,400 (40 percent of $6,000). Certain disabled, long-term unemployed veterans can reach $9,600, and long-term family assistance recipients can produce up to $9,000 across two years.
Should I still file Form 8850 for 2026 hires? The IRS has posted that Form 8850 is no longer in use, and states cannot issue certifications during the lapse. Keep screening records at hire and check with your state workforce agency, so you can act quickly if Congress restores the credit with transition relief.
Madras Accountancy supports US CPA firms and their business clients with payroll, bookkeeping and tax preparation work, including tracking certified hires, wage and hour data, and the credit forms that feed a client's return. To talk through how that could fit your workflow, contact our team.
This article is general information as of October 2026 and is not tax advice. Confirm the current rules for any client before filing.
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