The Work Opportunity Tax Credit (WOTC) is a federal tax credit available to employers who hire employees from designated target groups, such as qualified veterans, ex-felons, and SNAP recipients. However, it is scheduled to expire on December 31, 2025. If Congress does not renew the program, businesses could lose the potential of thousands of dollars per hire in tax savings. In this article, we explain the potential reasons for the hiatus, review past expirations, and offer strategic actions employers should take now to maximize benefits before WOTC’s expiration while remaining best prepared in the event of renewal.
One thing we want to make clear however, regardless if WOTC is renewed, employers should continue screening for WOTC even after the program’s expiration. Previous renewals of WOTC included a retroactive period, providing employers credits for employees hired during the hiatus. However, to maximize the success of claiming this credit, employers need to pay attention to state certifications. Read on to learn why.
Understanding WOTC and Its Value to Employers
The Work Opportunity Tax Credit (WOTC) provides employers with a maximum of $9,600 per qualified hire from designated target groups who typically face barriers to when seeking employment. For many employers—especially in high-turnover industries like staffing, hospitality, and manufacturing—this credit significantly reduces hiring costs while supporting workforce diversity and inclusion initiatives.
According to Experian Employer Services, more than 14 million WOTC screenings are completed annually, translating to billions in tax incentives secured for employers.
Value for Employees
A 2021 study from RAND measured the impact of the 2007 WOTC expansion on employment and earnings of disabled veterans. According to their findings, WOTC increased disabled veterans’ employment by two percentage points in 2007 and 2008, representing roughly 32,000 jobs each year. The tax credit program also improved annual wage income of this group by 40 percent, or around $1,000 per eligible individual.
WOTC Expiration
WOTC is a temporary tax provision, meaning it requires periodic reauthorization by Congress. Current legislation set its expiration date for December 31, 2025, unless new legislation is passed to extend it.
Several factors affect WOTC’s future:
- Legislative Prioritization: With ongoing debates over tax reform, federal spending, and other economic legislation, WOTC renewal may fall behind in congressional priorities.
- Political Climate: Tax credits are sometimes scrutinized as special interest benefits, and WOTC’s renewal depends on bipartisan support, which may be difficult to secure.
- Expiration Design: WOTC’s temporary nature makes it vulnerable to recurring legislative cycles. Unlike permanent parts of the tax code, it does not automatically continue.
WOTC’sHistory
WOTC has faced expiration, or even expired, several times in the past. Since 1996 the program has had 13 extensions along with legislation in between to modify the specific target group eligibility. Understanding these historical patterns can help employers anticipate what may happen next:
- 1996: Small Business Job Protection Act created WOTC
- 1997: Taxpayer Relief Act authorizes separate Welfare-to-Work (WtW) tax credit
- 2004: Working Families Tax Relief Act extends WtW
- 2006: Tax Relief and Health Care Act reauthorizes WOTC through Dec 31, 2007, consolidates WtW into WOTC, expands eligibility and extends employer submission deadline
- 2009: ARRA adds “disconnected youth” and “unemployed veterans”
- 2012: American Taxpayer Relief Act extends WOTC through Dec 31, 2013
- 2014–2015: WOTC wasn’t renewed until December 2015 as part of the PATH Act. This retroactive renewal allowed businesses to claim credits from earlier in the year
- 2019–2020: The credit faced another sunset risk but was extended as part of a larger tax extenders package
- 2020–2021: Amid COVID-19 economic support measures, WOTC gained renewed attention and was extended again
- 2025: WOTC scheduled to expire Dec 31, 2025 unless extended
These cycles show a pattern: WOTC is often renewed—but the renewal is not always timely, which introduces compliance and planning challenges for employers who may seek retroactive credits. This makes continuing to screen and submit to state agencies valuable for credit continuity following a hiatus.
Proposed Legislation
There are several legislative proposals that could affect WOTC’s future:
Improve and Enhance the WOTC Act: H.R. 1177/S.492
Goal: Modernize WOTC and expand incentives for employers to retain workers
Changes to Credit / Target Groups:
- Raises credit rate from 40% → 50% of qualified first-year wages; adds a higher-hours tier (≥400 hours) with a second wage cap
- Increases veteran wage caps significantly (e.g. $12k / $24k)
- Improves two-year credit for long-term family assistance recipients
- Removes the age-40 limit for SNAP recipients
Hire Dates Impacted: Applies to employees hired after 12/31/2025
Status: Introduced in both chambers (House & Senate)
Helping to Encourage Real Opportunities (HERO) for Youth Act (H.R. 2507)
Goal: Strengthen and expand WOTC opportunities for youth employment
Changes to Credit / Target Groups:
- Expands “summer youth” to year-round youth hires, with ≤20 hrs/week during school attendance
- Creates a new “Disconnected Youth” target group (ages 16–24 not in school or employed in prior 6 months, or aged-out foster youth 16–20)
Hire Dates Impacted: Applies to individuals hired after enactment
Status: Introduced in House only
Military Spouse Hiring Act (H.R. 2033 / S. 1027)
Goal: Address high unemployment among military spouses by creating a dedicated WOTC category
Changes to Credit / Target Groups:
- Adds “qualified military spouse” as a new WOTC target group
Hire Dates Impacted: Applies to individuals hired after enactment
Status: Bipartisan bills introduced in both House & Senate
Renewal Bill Still Pending
- Additional reconciliation bill unlikely in the short term, but a tax bill is still possible
- Some milestones impacting that likelihood and its timing:
- Continuing Resolution handling
- End of year 2025 bipartisan tax extenders bill
- Pre 2026 mid-terms
- Lame Duck Session 2026: History shows consistent bipartisan support & retroactive renewal — clients need to stay engaged to avoid missed credits; Screening now protects your ROI, even if legislation lag creates a temporary pause
- WOTC will continue to generate tax credits for eligible hiresthrough12/31/25; This is a useful vehicle for offsetting Federal tax liability
What EmployersCan Do
There are proactive steps employers can take and things to consider ahead of WOTC’s expiration.
1.ContinueWOTC Screening and Hiring
Capitalize on the time remaining by prioritizing hiring from eligible target groups. Experian’s smart WOTC survey process simplifies the collection of Forms 8850 and 9061 and improves compliance through real-time validations and credit forecasts. Previous WOTC renewals have included a retroactive period, meaning there is an opportunity to claim credits for hires made during the hiatus period.
2. Maximize Current-Year Credits
Ensure that all qualified hires are properly screened and submitted. Partnering with a provider like Experian Employer Services helps streamline the documentation, submission, and audit-readiness process to avoid missed opportunities.
3.Pay Attention to Issued Certifications
In order to claim the WOTC on a qualified individual, that individual must be certified by the corresponding State Workforce Agency (SWA), who verifies the individual’s eligibility. State certifications will not be provided during WOTC’s hiatus period. An employer can only confidently expect future credits for employees who were already certified, or were hired before WOTC’s December 31, 2025 expiration. Employers might not receive credits for employees hired before or during the hiatus who were not certified by a SWA.
4.Leveragethe Retroactive Component
Historically, WOTC has been retroactively renewed. This allows employers to claim credits for eligible hires made during the “hiatus” period if the program is reinstated. However, this requires complete and compliant documentation at the time of hire. Employers who want to plan for the possibility of retroactive credits should continue WOTC screening and documentation processes uninterrupted through the expiration date and beyond to retain eligibility.
5. Stay Informed and Engage Legislatively
Monitor legislative developments through trusted sources such as the Experian Employer Services blog, which provides updates and insights on tax credit legislation. Employers may also consider engaging with industry associations and coalitions advocating for the extension of WOTC.
6. Plan for Uncertainty
Retroactive renewal is not guaranteed. Employers should also build contingency plans for 2026 hiring. This includes evaluating the financial impact if WOTC is not available and identifying alternative incentives.
How Experian Can Help
Experian Employer Services is a leading partner in tax credit management, including WOTC. We deliver:
- One of the shortest surveys in the industry, improving completion rates
- End-to-end WOTC compliance and credit capture
- Seamless integrations with platforms like Workday, UKG, and iCIMS
- Credit forecasting and audit preparation
Whether you are a large enterprise or a growing mid-market employer, we offer scalable solutions to capture every eligible credit—and help you stay ahead of legislative changes.
Other Tax Credits and Incentives
Whether or not WOTC is extended or renewed, there are other opportunities employers can pursue designed to reward strategic hiring and business growth.
- Piggyback tax credits that follow WOTC, i.e., NY Youth, MD WOTC and more
- Family and Medical Leave Act
- Military Leave Wage Differential
- Federal Empowerment Zone
- Job creation and investment tax credits
Contact Experian Employer Services to learn more about optimizing your tax credit strategy for WOTC or request a demo of our tax credit solutions.