Issue Number: Tax Tip 2025-60
The Work Opportunity Tax Credit is available until the end of 2025
Finding a job can be a challenge and for certain groups, it can be even harder. The Work Opportunity Tax Credit is a federal tax credit available to employers for hiring individual from certain groups who consistently face significant barriers to employment.
The Work Opportunity Tax Credit is available until Dec 31,2025, for employers that hire workers who are qualified as part of these groups
Groups
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Qualified recipients of:
- Long-term family assistance
- Long-term unemployment
- Supplemental Nutrition Assistance Program benefits
- Supplemental Security Income
- A state program funded under part A of title IV of the Social Security Act relating to Temporary Assistance for Needy Families
- Formerly incarcerated individuals
- Qualified unemployed veterans, including disabled veterans
- Designated community residents living in empowerment zones or rural renewal counties
- People referred to vocational rehabilitation programs
- Summer youth employees living in Empowerment Zones
Certification requirement
To claim the credit, an employer must first get certification that an individual is certified as a member of one of the groups listed above. To do this, the employer submits IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to their state workforce agency within 28 days after the eligible worker begins work. Employers should not submit this form to the IRS. They should contact their state workforce agency with questions about processing Form 8850.
Figuring and claiming the credit
Eligible businesses claim the Work Opportunity Tax Credit on their federal income tax return. It's generally based on wages paid to eligible workers during the first year of employment. After the employer receives the Form 8850 certification from the state workforce agency, they can:
Special rule for tax-exempt organizations
A special rule allows tax-exempt organizations to claim the credit only for hiring qualified veterans who began work for the organization before 2026. After the employer receives the Form 8850 certification from the state workforce agency, these organizations claim the credit against payroll taxes on Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. The IRS recommends that qualified tax-exempt employers don't reduce their required deposits as they wait for the tax credit.
Limitations on the credit
For a taxable business, the credit is limited to the business' income tax liability. Unused credit is subject to the normal carry-back and carry forward rules. For qualified tax-exempt organizations, the credit is limited to the amount of the employer's share of Social Security tax it owes on wages it paid to qualifying employees. See the instructions for Form 3800, General Business Credit for full details.
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