Maximize Your Hiring Incentives: The Work Opportunity Tax Credit Is Here Through 2025

koddo6
Sep 26
2 min read

The IRS has announced that the Work Opportunity Tax Credit (WOTC) remains available through December 31, 2025. This program provides meaningful tax incentives to employers who hire individuals from targeted groups that have historically faced significant barriers to employment. If you’re planning your workforce strategy for the next two years, this credit deserves a spot in your planning conversation.

What the Work Opportunity Tax Credit Offers

The WOTC is a federal tax credit designed to encourage hiring from certain groups, such as long-term recipients of public assistance, veterans, and individuals living in designated communities. When properly claimed, this credit can reduce an employer’s federal income tax liability and offset the cost of bringing on new employees.

Eligible Hires

Employers may qualify for the credit when hiring individuals who fall into one of several categories, including:

Long-term recipients of Temporary Assistance for Needy Families (TANF)
Recipients of Supplemental Nutrition Assistance Program (SNAP) benefits
Certain unemployed veterans, including those with service-connected disabilities
Formerly incarcerated individuals
Residents of empowerment zones or rural renewal counties
SSI recipients and participants in vocational rehabilitation programs
Summer youth employees living in empowerment zones

A complete list of targeted groups appears on the IRS website.

Certification Requirements: The 28-Day Rule

Employers must receive certification that a new hire is a member of a targeted group before claiming the credit. This is done by submitting Form 8850 (Pre-Screening Notice and Certification Request) to the appropriate state workforce agency within 28 days of the employee’s start date. Missing this deadline can result in losing eligibility for the credit.

How to Claim the Credit

For taxable businesses: Once certified, use Form 5884 (Work Opportunity Credit) to compute the amount, then claim it on Form 3800 (General Business Credit) with your federal return.
For tax-exempt organizations: The credit applies to qualified veterans only, offsetting the employer’s share of Social Security tax. Claim it using Form 5884-C.

Unused credit amounts may be carried forward or back under general business credit rules.

Why Planning Now Matters

With the WOTC extended only through the end of 2025, employers should incorporate this incentive into their hiring plans now. By identifying eligible candidates and filing timely certifications, businesses can both support their communities and improve their tax

position.

Key Takeaways

The WOTC is a proven tool to reduce hiring costs while expanding your applicant pool.
The credit expires on December 31, 2025 unless Congress extends it again.
Compliance is procedural — timely certification and accurate wage tracking are critical.

Moving Forward

As a bookkeeping and tax preparation firm, we encourage clients to evaluate how the WOTC can fit into their staffing and tax strategies. If you’re hiring in 2024 or 2025, this credit could directly reduce your federal tax liability or Social Security tax obligations (for qualifying nonprofits).

WOTC opportunities expire fast, but the benefits can be substantial. Let’s build a compliant process together so every eligible hire counts toward your bottom line. Schedule a call with Oddo Financial Services today to get started.