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Is the Work Opportunity Tax Credit Still Worth Screening For?
The Work Opportunity Tax Credit (WOTC) is a federal tax credit for employers who hire people from certain groups that face barriers to work, and it currently covers only employees who started on or before December 31, 2025. Congress has not renewed it for later hires as of October 2026, but it has come back after earlier lapses, so we recommend screening every new hire anyway.
This article covers where WOTC stands today, who qualifies, what the credit is worth, and how to claim it, with a few examples from the kind of Maine businesses we work with every day.
Key Takeaways from this Article
- WOTC covers employees who started work on or before December 31, 2025, and Congress has not renewed it for 2026 hires as of October 2026.
- It is still worth screening every new hire, because past renewals have been retroactive and a Form 8850 filed on time is the safest way to protect a 2026 hire's credit.
- For most target groups the credit is 40% of up to $6,000 in first year wages, or up to $2,400 per hire, and certain veterans can reach $9,600.
- The process runs on a tight clock: Form 8850 on or before the job offer, submitted to your state workforce agency within 28 days of the start date.
- Restaurants, hospitality, retail, and other Maine businesses that hire a lot of hourly or seasonal staff tend to get the most out of it.
What Is the Work Opportunity Tax Credit?
The Work Opportunity Tax Credit is a federal tax credit that reduces the income tax a business owes when it hires someone from one of ten target groups, such as qualified veterans, SNAP recipients, or people who have been unemployed for six months or more. The employee has to be certified by a state agency, and the credit is based on the wages you pay them in their first year.
WOTC has been around since 1996 and is run jointly by the IRS and the U.S. Department of Labor. Businesses of any size can claim it, and there is no cap on the number of qualifying employees you can claim it for.
One thing to know up front: WOTC is nonrefundable. It can bring your federal income tax down, but it won't create a refund on its own. Unused credit can generally be carried back one year and forward up to 20 years.
Is the Work Opportunity Tax Credit Still Available in 2026?
The Work Opportunity Tax Credit is available only for employees who began work on or before December 31, 2025. The law that last extended it, the Consolidated Appropriations Act, 2021, ran through the end of 2025, and Congress has not passed a renewal as of October 2026.
That date is tied to when the employee started, not when you paid them. So if you hired a qualifying employee in, say, October 2025, the wages you pay them through October 2026 can still count toward the credit on your 2026 return. A person who started on January 5, 2026 can't generate a credit right now.
Here in Maine, the Department of Labor is still accepting applications for 2026 hires through its Maine CertLink portal. Those applications aren't denied. They're held and reviewed if and when Congress reauthorizes the program. Federal guidance from the Department of Labor allows states to keep reviewing and preparing requests during a lapse, but not to issue certifications.
WOTC has lapsed before. It expired at the end of 2014 and Congress renewed it in December 2015, retroactive to the start of that year. Bills to extend and expand it were introduced in Congress in 2025, but none has passed. Nobody can promise a renewal, and nobody can promise it would be retroactive.
Status last reviewed: October 7, 2026. If Congress acts, we'll update this section.
Why Should You Keep Screening New Hires If the Credit Has Lapsed?
You should keep screening for WOTC because the 28 day filing deadline doesn't pause during a lapse. The IRS says that if the credit is renewed retroactively, it may give employers extra time to file for people hired during the gap, but that is up to the IRS and isn't guaranteed. A Form 8850 already on file with the state is the only sure way to keep a 2026 hire eligible.
Picture a seafood restaurant in Ogunquit that brings on 15 seasonal staff in May. Two of them are SNAP recipients and one is a veteran who'd been out of work for seven months. If the owner stops screening because the credit lapsed, and Congress renews WOTC retroactively in December, those three hires may be worth nothing. Their 28 day windows closed back in June, and the owner would be counting on the IRS to reopen them.
The cost of screening is small. It's one more form in the hiring packet, and if you use electronic onboarding, it can be part of the steps a new hire clicks through anyway. What you're really protecting is the option to claim later.
Who Qualifies for the Work Opportunity Tax Credit?
An employee qualifies for WOTC when a state workforce agency certifies that they belong to one of ten target groups. Each group has its own rules, and the details below are a summary. The Form 8850 instructions have the full definitions.
- Qualified veterans, including veterans whose family received SNAP benefits for at least three months in the 15 months before hire, veterans unemployed for at least four weeks in the year before hire, and veterans with a service connected disability who were hired within a year of leaving active duty or were unemployed for at least six months.
- TANF recipients whose family received Temporary Assistance for Needy Families for any nine months in the 18 months before hire.
- Long term family assistance recipients, generally people whose family received TANF for at least 18 consecutive months before hire, or who lost TANF eligibility because of time limits and were hired within two years.
- SNAP recipients ages 18 to 39 whose family received benefits for the six months before hire. A family that lost SNAP eligibility under the time limit for adults without dependents can qualify with at least three of the five months before hire.
- Qualified ex felons hired within one year of a felony conviction or release from prison.
- Designated community residents ages 18 to 39 who live in an empowerment zone or a rural renewal county. In Maine, the IRS lists Aroostook and Piscataquis as rural renewal counties.
- Vocational rehabilitation referrals, meaning people with a disability referred to you through an approved rehabilitation program.
- Summer youth employees ages 16 or 17 who work between May 1 and September 15 and live in an empowerment zone.
- Supplemental Security Income (SSI) recipients who received SSI for any month ending in the 60 days before hire.
- Long term unemployed people who were out of work for at least 27 consecutive weeks and collected unemployment for some of that time.
Some people don't qualify even if they fit a group. That includes your relatives and dependents, anyone who owns more than 50% of the business, and former employees you're rehiring. The credit also doesn't apply to an employee who works fewer than 120 hours for you.
How Much Is the WOTC Worth?
For most target groups, WOTC is worth 40% of up to $6,000 in first year wages, or a maximum of $2,400 per hire, when the employee works at least 400 hours. The percentage drops to 25% for employees who work 120 to 399 hours, and there's no credit under 120 hours. Some groups have higher wage limits.
| Target group | Wage limit | Maximum credit at 400+ hours |
|---|---|---|
| Most groups (including SNAP, SSI, ex felons, long term unemployed, and veterans in SNAP households or unemployed at least four weeks) | $6,000 | $2,400 |
| Summer youth employees | $3,000 | $1,200 |
| Veterans with a service connected disability, hired within one year of leaving active duty | $12,000 | $4,800 |
| Veterans unemployed at least six months in the year before hire | $14,000 | $5,600 |
| Veterans with a service connected disability and unemployed at least six months | $24,000 | $9,600 |
| Long term family assistance recipients | $10,000 per year, over two years | $9,000 total (40% of year one, 50% of year two) |
The wage limit is where people tend to trip up. The credit is a percentage of wages, but only up to the cap for that group. A few examples, all for employees who started in 2025:
- A line cook certified as a SNAP recipient works 520 hours and earns $8,320 in her first year. The credit is 40% of $6,000, or $2,400. The wages above $6,000 don't add anything.
- A dishwasher certified as long term unemployed works 300 hours and earns $4,500. Because he worked fewer than 400 hours, the credit is 25% of $4,500, or $1,125.
- A veteran with a service connected disability who had been unemployed for eight months earns $32,000 in his first year. His wage limit is $24,000, so the credit is 40% of $24,000, or $9,600.
How Do You Claim the Work Opportunity Tax Credit Step by Step?
Claiming the Work Opportunity Tax Credit takes five steps, and the first two happen during hiring. Miss either one and the credit is gone for that employee.
- Screen before the offer. The job applicant completes page one of IRS Form 8850 (Pre-Screening Notice and Certification Request for the Work Opportunity Credit) on or before the day you offer the job. You fill in page two with the dates they gave the information, were offered the job, were hired, and started.
- Submit within 28 days. Send Form 8850 to your state workforce agency within 28 calendar days of the employee's start date, along with ETA Form 9061 (or ETA Form 9062 if the person already has a conditional certification). Long term unemployed applicants also need ETA Form 9175. Maine employers file with the Maine Department of Labor, most easily through Maine CertLink.
- Wait for certification. The state reviews the application and sends a certification or a denial. Without a certification, there's no credit.
- Track hours and wages. Keep accurate records of each certified employee's hours and first year wages, since the credit depends on both. This is where good payroll records earn their keep.
- Claim it on your return. Taxable businesses calculate the credit on IRS Form 5884 and carry it to Form 3800, the general business credit, with their federal income tax return. Tax exempt organizations can claim it only for qualified veterans, using Form 5884-C against their share of Social Security tax.
Your tax professional handles step five. Steps one and two are on you and your hiring process, which is why it helps to build the screening into your onboarding so it happens the same way for every hire.
Which Maine Businesses Get the Most Out of WOTC?
Maine businesses that hire often, and hire for hourly roles, get the most from WOTC. The more people you screen, the more likely some of them qualify.
That describes a lot of our clients. Restaurants and hospitality businesses along the coast staff up every spring. Retailers add people before the holidays. Landscapers and construction crews bring on seasonal help. A 60 person hotel in Bar Harbor that hires 40 seasonal workers a year has a real shot at several certifications. If you bring on extra help for the busy months, our guide to hiring temporary workers covers the rest of what to think about.
To be honest about fit, WOTC adds little for a six person accounting office that hires one person every couple of years. It's still worth adding the form to your hiring packet, but it won't move the needle the way it can for a business that hires dozens of people each season.
How Does WOTC Work for Paper Trails Clients?
Paper Trails refers clients to isolved for WOTC, and claims are processed by isolved's tax credit team. Screening can happen during electronic onboarding in isolved, so the new hire answers the questions as part of their first day paperwork rather than on a separate form you have to remember.
isolved’s fee is based on the number of new hires you have each year. You can see how screening works, step by step, on our Work Opportunity Tax Credit page. If you’d like to know whether your new hires are being screened, or want to start, reach out to your payroll processor at payroll@papertrails.com or 207.721.8575.
FAQs: Work Opportunity Tax Credit
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Only for people who started work on or before December 31, 2025. Congress has not renewed the credit for later hires as of October 2026. Wages you pay in 2026 to a qualifying 2025 hire can still count, as long as they fall within that employee's first year on the job.
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Yes. Congress has renewed WOTC after past lapses and made it retroactive. The IRS may allow extra filing time after a retroactive renewal, but that isn't guaranteed, so filing Form 8850 within 28 days of each start date is the safest way to protect a 2026 hire. Maine is accepting 2026 applications and holding them until Congress acts.
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For most target groups, it is 40% of up to $6,000 in first year wages for an employee who works 400 hours or more, so up to $2,400. It drops to 25% for 120 to 399 hours and is zero under 120 hours. Certain veterans can reach $9,600, and long term family assistance recipients can reach $9,000 over two years.
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The applicant fills out Form 8850 on or before the day you offer the job, and you submit it to your state workforce agency within 28 calendar days of the employee's start date. In Maine, that agency is the Maine Department of Labor.
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No. Relatives, dependents, anyone who owns more than 50% of the business, and people who have worked for you before do not qualify, even if they belong to a target group.
Conclusion
If you hired anyone in 2025, check with your tax professional before you file that those hires were screened and certified, since their 2026 wages may still count. And if you're hiring now, keep the Form 8850 in your packet and keep filing within 28 days. Our team is happy to look at your onboarding setup with you, and our WOTC page lays out how screening works for Paper Trails clients.
Paper Trails refers clients to isolved for WOTC, and claims are processed by isolved's tax credit team with Equifax. This is general information, not tax advice. Credit amounts and eligibility depend on IRS rules and State Workforce Agency certification, so please check with your tax professional.
Updated: October 2026
Written by: Jon Portanova
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