Work Opportunity Tax Credit (WOTC) — Get Up to $9,600 Per New Hire
What Is It?
The Work Opportunity Tax Credit is a federal income tax credit that rewards businesses for hiring employees from ten designated target groups that face significant barriers to employment. The credit ranges from $1,200 to $9,600 per qualifying hire — a dollar-for-dollar reduction in your federal tax bill, not just a deduction. Most small business owners who qualify simply don’t know it exists.
Who Are the 10 Target Groups?
| Target Group | Max Wages Considered | Credit Rate | Max Credit |
|---|---|---|---|
| SNAP (food stamp) recipients | $6,000 (1st year) | 40% | $2,400 |
| SSI recipients | $6,000 | 40% | $2,400 |
| Long-term unemployed (27+ weeks) | $6,000 | 40% | $2,400 |
| Ex-felons | $6,000 | 40% | $2,400 |
| Vocational rehabilitation referrals | $6,000 | 40% | $2,400 |
| Veterans (SNAP) | $6,000 | 40% | $2,400 |
| Veterans (unemployed 4–6 months) | $12,000 | 40% | $4,800 |
| Veterans (unemployed 6+ months) | $14,000 | 40% | $5,600 |
| Veterans (disabled) | $24,000 | 40% | $9,600 |
| Long-term family assistance recipients (TANF) | $10,000/yr × 2 yrs | 40%/50% | $9,000 |
| Designated community residents | $6,000 | 40% | $2,400 |
| Summer youth employees (16–17) | $3,000 | 40% | $1,200 |
The credit rate is 40% of first-year qualified wages for employees who work at least 400 hours; 25% for employees who work 120–399 hours.
The Critical 28-Day Deadline
This is the most common reason businesses miss out: you must submit Form 8850 (Pre-Screening Notice and Certification Request for WOTC) to your state workforce agency within 28 calendar days of the employee’s first day of work. There are no exceptions and no extensions.
How to Claim the Credit
Step 1 — Pre-screen new hires. On or before the job offer date, give new hires IRS Form 8850 (one page) and ETA Form 9061 (from the Department of Labor) to complete. These self-certify their eligibility for target group status.
Step 2 — Submit Form 8850 to your state workforce agency within 28 days. Most states now accept electronic submissions. Find your state agency at doleta.gov/business.
Step 3 — Receive certification. The state workforce agency reviews the forms and issues a certification letter confirming the employee qualifies. Retain this certification.
Step 4 — Calculate the credit on Form 5884 and carry it to your business tax return (Form 3800, General Business Credits).
What Most People Don’t Know
- The credit can be used against self-employment tax. Eligible small business owners (including S corps and partnerships) can apply the credit against self-employment tax, not just income tax.
- Many third-party WOTC screening services offer free prescreening — companies like ADP, Equifax Workforce Solutions, and Walton integrate WOTC screening into the hiring process at no cost, taking a small fee only if the credit is realized. These services ensure you never miss the 28-day window.
- The credit applies to full-time and part-time employees. Part-time employees who work 120+ hours qualify for the 25% rate. There’s no minimum hours requirement to begin the screening process.
- State WOTC programs exist on top of the federal credit in some states — California, New York, and Georgia have additional hiring incentive programs for overlapping target groups.
Frequently Asked Questions
Can I claim WOTC for employees I hired in prior years?
No — the 28-day pre-screening deadline is hard. However, if you missed the deadline due to a good-faith error, your state workforce agency may (at their discretion) accept late submissions in limited circumstances. It’s worth asking.
Does WOTC apply to all types of businesses?
WOTC is available to for-profit businesses and tax-exempt organizations (under the Section 501(c) rules for qualified 501(c) employers hiring qualified veterans only). Most nonprofits cannot claim WOTC for non-veteran hires.
Is the WOTC permanent law?
No — it has been extended by Congress repeatedly through multi-year authorizations. As of 2026, the credit is authorized through December 31, 2025 and may need further extension. Check the IRS website for current authorization status.
If an employee quits in the first month, can I still claim the credit?
No. The minimum employment threshold is 120 hours worked to claim the reduced 25% credit, and 400 hours to claim the full 40% credit. You do not need to wait until the end of the year — the credit is calculated based on wages paid during the qualifying period.