WOTC Expired: What Employers Lose and the Hiring Credits Still Available in 2026

A hire you made on December 30, 2025 could be worth up to $9,600 in federal tax credits. The identical hire made on January 2, 2026 is worth $0 — for now. The Work Opportunity Tax Credit (WOTC) lapsed at the end of 2025, and Congress has not yet renewed it. But if you stop screening new hires today, you could lose the credit twice: once to the lapse, and again if Congress renews it retroactively and you have no timely paperwork to claim it.

This guide covers what expired, what it costs you, the hiatus playbook that preserves your eligibility, what revival might look like, and the hiring-related credits that are still fully available in 2026.

What Actually Expired (and When)​

The WOTC's most recent authorization ran through December 31, 2025, under Section 113 of Division EE of the Consolidated Appropriations Act, 2021. As of January 1, 2026, employees who begin work cannot generate the credit until Congress reauthorizes the program.

This is not unusual for WOTC. Congress has renewed the program roughly 15 times since its 1996 debut, frequently after a lapse and frequently with retroactive effect. The pattern matters because it shapes everything you should do during this hiatus: act as if the credit will come back, because historically it does — but never assume any particular hire is covered until a renewal is signed.

One thing that did not save WOTC: the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025. Despite covering a long list of business tax provisions, the bill did not address WOTC at all, so the December 31, 2025 sunset took effect as scheduled.

What Employers Lose: The Credit Amounts at Stake​

WOTC is a general business credit worth 40% of a certified new hire's first-year qualified wages, up to a wage cap that depends on the hire's targeted group. The employee must work at least 120 hours for you to claim anything (25% rate for 120 to 399 hours; the full 40% rate at 400 hours or more).

The headline figures employers are now missing on 2026 hires:

• Most targeted groups (SNAP recipients, ex-felons, vocational rehabilitation referrals, SSI recipients, long-term unemployment recipients, designated community residents): 40% of up to $6,000 in wages, for a maximum credit of $2,400 per hire.
• Disabled veterans hired within a year of discharge or after long-term unemployment: 40% of up to $24,000 in wages, for a maximum credit of $9,600 per hire — the richest WOTC category.
• Long-term family assistance (TANF) recipients: up to 40% of $10,000 in year one plus up to 50% of $10,000 in year two, for a maximum of $9,000 across two years. This is the only WOTC category with a second year.
• Summer youth employees (ages 16–17): 40% of up to $3,000, for a maximum of $1,200.

For high-volume hirers in retail, hospitality, staffing, and food service — industries where a meaningful share of entry-level hires fall into a targeted group — the lapsed credit can easily total tens of thousands of dollars per location per year.

WOTC was not the only hiring incentive to sunset. Two companions lapsed on the same December 31, 2025 date and were likewise left out of OBBBA:

• Empowerment Zone employment credit: up to $3,000 per employee per year (20% of the first $15,000 in wages) for employees who both live and work in a federal empowerment zone, claimable every year with no pre-certification requirement.
• Indian employment credit (Section 45A): 20% of qualified wages and health insurance costs above a base amount, up to $20,000 per qualified employee — a maximum of $4,000 per employee — for enrolled tribal members (or spouses) working on or near a reservation.

The Hiatus Playbook: Keep Screening Every New Hire​

The Department of Labor's Employment and Training Administration (ETA) has issued hiatus processing guidance (TEGL 16-20, Change 1) that tells state workforce agencies (SWAs) what to do during the lapse:

• Certification requests for employees who started on or before December 31, 2025 are fully processed and certified as normal.
• Requests for employees who start on or after January 1, 2026 are accepted, date-stamped, logged, and retained — but no certification may be issued until Congress reauthorizes the program.

That "log and hold" queue is precisely why you should keep your WOTC process running. Every compliance advisor covering the hiatus gives the same instruction: screen every new hire exactly as before, because only timely filed applications can produce credits if Congress renews the program retroactively. There is no late filing and no cure for a missed deadline.

The Two Deadlines That Still Matter​

1. Pre-screen on or before the job offer. The new hire must complete IRS Form 8850 (Pre-Screening Notice and Certification Request) no later than the day you extend the offer — the same-day rule that has always applied.
2. Submit to the SWA within 28 calendar days of the start date. Mail or electronically file Form 8850 plus ETA Form 9061 or 9062 to the state workforce agency within 28 days after the employee begins work. Day 29 is fatal to the credit for that hire, hiatus or not.

Practical steps for the hiatus:

• Leave your applicant-tracking and onboarding WOTC screens turned on. Turning them off "until Congress acts" is the single most expensive mistake of every past lapse.
• Keep filing within the 28-day window and keep your submission receipts. The state will hold your 2026-start requests in the pending queue.
• If you use a WOTC vendor or your payroll provider handles screening, confirm in writing that hiatus-period filings are continuing — do not assume it.
• Track hours toward the 120-hour and 400-hour thresholds in your payroll system so certified hires translate into claimed credits the moment a renewal lands.

What Congress Might Revive​

No renewal has been enacted as of this writing, and ETA has given no indication of whether one is coming. But there are live vehicles worth watching:

The Improve and Enhance the Work Opportunity Tax Credit Act (S. 492 in the 119th Congress, with a House companion). This bipartisan bill would modernize a credit whose structure has barely changed in decades. Its headline provisions:

• Raise the credit rate from 40% to 50% of qualified first-year wages.
• Expand the credit for employees who stay at least 400 hours, strengthening the retention incentive.
• Eliminate the maximum age limit for SNAP recipients, opening the credit to older hires receiving food assistance.

A year-end tax extenders package. Trade groups that rely on WOTC — grocers, restaurants, and staffing firms among them — are lobbying for WOTC's inclusion in an end-of-year extenders bill. The honest caveat, voiced by the lobbyists themselves, is that an extenders package needs bipartisan momentum that is currently in short supply.

For your planning, treat renewal as likely-but-unscheduled: past lapses have almost always ended in retroactive extension, yet no renewal is guaranteed and none can be booked in a forecast. Do not reduce estimated tax payments or promise the credit to owners and lenders until a bill is signed.

Hiring Credits Still on the Table in 2026​

While WOTC sits in hiatus, several employer credits remain fully available — and OBBBA actually made two of them permanent and more generous for tax years beginning after December 31, 2025.

Paid Family and Medical Leave Credit (Section 45S) — Now Permanent​

Previously scheduled to expire at the end of 2025, the 45S credit is now a permanent part of the code. It offers employers a credit of 12.5% to 25% of wages paid to qualifying employees during family and medical leave, with the rate rising as the employer's wage-replacement percentage rises. OBBBA also enhanced it: employers can now count qualifying leave-insurance premiums (not just wages) toward the credit, and can elect to lower the minimum employee service requirement from one year to six months. If you already offer paid leave, or carry a leave-insurance policy, this credit deserves a fresh look for 2026.

Employer-Provided Childcare Credit (Section 45F) — Permanent and Much Larger​

Also made permanent by OBBBA, the childcare credit covers 25% of qualified childcare facility expenditures plus 10% of qualified resource-and-referral costs. The cap jumps from $150,000 to $500,000 — $600,000 for eligible small businesses — with inflation adjustments going forward. For small employers weighing an on-site facility, a contracted childcare slot program, or even a referral program, the economics changed materially in your favor.

FICA Tip Credit (Section 45B) — Expanded to Beauty Services​

Restaurants have long claimed a credit for the employer share of FICA taxes on tips above the minimum wage. Starting with tax years beginning in 2025, OBBBA extends that treatment to beauty-service businesses whose workers customarily receive tips — barbering, hair care, nail care, esthetics, and spa services. If you run a salon or spa with tipped employees, coordinate with your payroll provider to capture this credit for the first time.

Disability-Related Incentives — Unchanged​

The disabled access credit (Section 44) still offers eligible small businesses (gross receipts of $1 million or less, or 30 or fewer full-time employees) a credit of 50% of eligible access expenditures between $250 and $10,250 — up to $5,000 per year — for costs like accessible entrances, signage, and equipment. The barrier-removal deduction (Section 190) still allows any business to deduct up to $25,000 per year for architectural and transportation barrier removal. Neither provision was touched by the WOTC lapse.

State Hiring Credits — Check Your Own Backyard​

Many states run hiring, training, and zone-based credits that operate independently of federal WOTC authorization. State programs were not affected by the federal lapse, and some states conform to WOTC definitions while others run entirely separate regimes. A quick review of your state's current employer-credit menu can surface money that needs no act of Congress.

Five Mistakes That Forfeit Credits During the Hiatus​

1. Shutting off screening. Every past lapse has produced employers who stopped pre-screening, then watched a retroactive renewal cover everyone else's hires but not theirs. Keep Form 8850 in the onboarding packet.
2. Missing the 28-day window. The SWA must receive the request within 28 calendar days of the start date. There is no extension, no reasonable-cause relief, and no way to reconstruct eligibility after the fact.
3. Claiming 2026 hires on your 2026 return prematurely. Form 5884 requires a certification for each hire claimed. Until the SWA can issue certifications for 2026 starts — which requires reauthorization — those hires do not belong on the form.
4. Forgetting the wage-deduction offset. Under Section 280C, you must reduce your deductible wage expense by the amount of the credit. Claiming a $2,400 WOTC credit means deducting $2,400 less in wages; the credit is still worth more than the lost deduction for almost every employer, but your books must reflect both sides.
5. Nonprofits ignoring pre-2026 veteran hires. Tax-exempt employers could claim WOTC for qualified veterans hired through 2025 against payroll taxes using Form 5884-C. If you hired qualifying veterans last year and never filed, that money is still collectible — the lapse only affects 2026 starts.

Keep Your Hiring Credits Audit-Ready​

Credits claimed across a hiatus and a possible retroactive renewal will draw documentation questions, so your records need to be airtight: pre-screening dates, offer dates, SWA submission receipts, state certifications, hours worked toward the 120-hour and 400-hour marks, and qualified wages by targeted group. WOTC also flows through the general business credit (Form 3800), with its ordering rules and one-year-back, twenty-year-forward carryovers — another reason the per-hire paper trail has to survive for years, not months. Tracking certifications, wage offsets, and carryforwards in one transparent ledger keeps a future renewal from turning into a scramble.

Simplify Your Financial Management​

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