The Work Opportunity Tax Credit (WOTC) is a federal tax credit that was available to employers who hire employees from designated target groups, such as qualified veterans, ex-felons, and SNAP recipients. However, it’s current iteration expired December 31, 2025. 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 ahead of possible renewal.
One thing we want to make clear is that employers should continue screening for WOTC even during the program’s hiatus. 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) provided 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 were completed annually. This amounts to $1 billion claimed annually by employers in WOTC credits based on data from the U.S. Department of Labor.
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. The previous legislation expired December 31, 2025.
Several factors affect WOTC’s future:
- Legislative Prioritization: With ongoing debates over tax reform, federal spending, and other economic legislation, reinstating WOTC may fall behind in congressional priorities.
- Political Climate: Tax credits are sometimes scrutinized as special interest benefits, and WOTC 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’s History
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 expired Dec 31, 2025
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
What Employers Should Do During Hiatus
There are proactive steps employers can take and things to consider ahead of WOTC’s expiration.
1. WOTC Survey (Screening)
- Experian advises employers to continue surveying or screening all new hires for WOTC, even if the program temporarily expires.
Continuing to screen ensures that no potentially eligible hires are missed and that required documentation is captured in real time. - Historically, during some prior WOTC hiatus periods, employers were permitted to submit retroactive WOTC surveys once the program was reauthorized.
However, retroactive allowances are not guaranteed and are subject to Congressional action and state-level implementation.
Best practice: Employers should continue completing WOTC surveys at the time of hire rather than relying on the possibility of retroactive relief.
2. WOTC Submissions
- WOTC submissions are not automatically stopped during a hiatus. Experian will continue submitting eligible WOTC applications.
- State Workforce Agency (SWA) policies vary during a hiatus:
- States continue accepting submissions throughout the hiatus.
- Others accept submissions but hold or deny them until the program is reauthorized.
- As a best practice, Experian submits any eligible WOTC applications whenever state systems allow, so there is a record on file with the SWA for future processing once the program is renewed.
- In addition to completing WOTC surveys, continuing to send payroll data to Experian remains critical. Payroll data is required to calculate credits once certifications are issued and does not pause during a hiatus.
3. WOTC Certification
Certifications for hires before the program expiration:
- If an employee was hired on or before 12/31/2025 and the WOTC application was submitted to the SWA within the 28 day SLA, State Workforce Agencies continue reviewing and processing those submissions.
- States with existing backlogs will continue working through pending applications. As a result, new certifications will be issued in 2026, even while the program is in hiatus.
- Certifications issued during this period may result in claimable WOTC credits, provided all eligibility requirements are met.
Certifications for hires after the program expiration:
- Applications for employees hired after 12/31/2025 are typically held and not certified until Congress reauthorizes the program.
- A WOTC credit cannot be claimed on a federal tax return without an issued certification.
- Experian will not calculate or report WOTC credits for applicants who have not received an official certification from the SWA.
4. Stay Informed
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.
5. Key Takeaway
A WOTC hiatus affects new certifications, not survey completion, submission efforts, payroll tracking, or billing for credits tied to valid certifications. Employers should also build contingency plans for 2026 hiring. This includes evaluating the financial impact if WOTC is not available and identifying alternative incentives. Learn more about other targeted hiring and tax credit 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.