Do Companies Still Get Tax Breaks for Hiring Veterans?

Federal tax breaks for hiring veterans run through the Work Opportunity Tax Credit, and that credit expired on December 31, 2025. Veterans who start work on or after January 1, 2026, do not currently qualify their employers for the credit.¹ Companies that hired eligible veterans before that cutoff can still claim credits worth up to $9,600 per hire on their returns, and unused credits from prior years can be carried forward. Congress has revived the WOTC retroactively after past lapses, so the program may return, but no extension has been enacted as of now.

Where the WOTC Stands Now

The statute authorizing the WOTC excludes wages paid to anyone who begins work after December 31, 2025.¹ The IRS flagged Form 8850, the pre-screening form employers use to start the certification process, as “no longer in use” on March 19, 2026.² For new hires, the program is dormant.

This is not the first lapse. Congress let the WOTC expire in 2014 and then revived it retroactively nearly a year later, applying the extension back to the expiration date. Industry groups are pushing for the same approach now, and bipartisan legislation (the Improve and Enhance the WOTC Act) has been introduced to extend the credit through 2030. It has not passed.

If you’re hiring veterans in the meantime, the practical move is to keep pre-screening candidates and documenting eligibility as if the credit were active. Should Congress renew it retroactively to January 1, 2026, employers with paperwork already in hand will be able to claim credits others will lose. Employers whose qualifying hires occurred before 2026 should still file for any credits they haven’t yet claimed.

Which Veteran Hires Qualified

Not every veteran hire triggered the credit. The WOTC targeted veterans facing specific employment barriers tied to unemployment, disability, or financial hardship. Before any subcategory applied, the veteran had to meet a threshold definition: active duty (not counting training) for more than 180 days, or discharge because of a service-connected disability. A timing rule also excluded veterans whose most recent active duty period of more than 90 days ended within 60 days of the hiring date.³ In effect, a service member who walked straight from active duty into a job did not qualify.

Beyond the base definition, the veteran had to fall into at least one of these categories:

A member of a family that received SNAP benefits for at least three months during the 15 months before hiring.
Unemployed for a total of at least four weeks but less than six months during the year before hiring.
Entitled to compensation for a service-connected disability and hired within one year of discharge.
Entitled to compensation for a service-connected disability and unemployed for a total of at least six months during the year before hiring.
Unemployed for a total of at least six months during the year before hiring, regardless of disability status.

This is where employers commonly lost the credit. A recently separated veteran hired weeks after discharge generally did not qualify unless they had a service-connected disability or their family received SNAP benefits.³

Two other exclusions removed hires that otherwise looked eligible. Rehires never counted; the credit applied only to new hires, so bringing back a former employee produced nothing.⁴ Related-party rules also blocked credits on close relatives of the employer and on majority owners paying themselves.

How Much the Credit Is Worth

The credit is calculated as a percentage of qualified first-year wages, with the wage cap varying by category. The percentage turns on hours worked. If the veteran logs at least 400 hours during the first year, the rate is 40%. Between 120 and 399 hours, the rate drops to 25%. Under 120 hours, there is no credit.⁴

At the full 40% rate, the maximum credits are:¹

SNAP recipient or short-term unemployed veteran: 40% of the first $6,000 in wages, up to $2,400.
Disabled veteran, recently discharged: 40% of the first $12,000 in wages, up to $4,800.
Long-term unemployed veteran without a qualifying disability: 40% of the first $14,000 in wages, up to $5,600.
Disabled veteran who was long-term unemployed: 40% of the first $24,000 in wages, up to $9,600.

The $9,600 figure is the highest credit available under the entire WOTC program across all targeted groups. Hiring a veteran at the 25% rate rather than the 40% rate cuts each maximum by roughly a third.

A wage-deduction offset shrinks the net benefit. When you claim the WOTC, you must reduce your business deduction for wages by the amount of the credit.⁵ A $2,400 credit costs you a $2,400 wage deduction; at a 21% effective rate, that lost deduction adds about $504 in tax, so the real value of the credit is closer to $1,896. Still a net gain, but smaller than the headline number.

The 28-Day Deadline That Decides Everything

The paperwork is where most employers forfeit credits they were otherwise entitled to. Two steps have to happen on a tight timeline.

First, the employer and the job applicant must complete IRS Form 8850 on or before the day the job offer is made. The form is both a pre-screening questionnaire and a certification request.⁶ Along with Form 8850, the employer submits the applicable Department of Labor form (ETA Form 9061 or 9062) to document the veteran’s qualifying status.

Second, all of these forms must be sent to the State Workforce Agency in the state where the employee works no later than 28 calendar days after the veteran’s start date.⁷ Miss that window and the credit is gone for that hire. The forms go to the state agency only, not to the IRS.⁶ Submission procedures vary. Some states run online portals, others use fax or mail; the Department of Labor keeps a directory of state agencies with each state’s instructions. After review, the state issues a formal certification if the veteran qualifies. That certification is what you need to actually claim the credit.

Claiming the Credit on Your Return

With the state certification in hand, you calculate the credit on IRS Form 5884, Work Opportunity Credit, which walks through the wage amounts and applicable percentages for each certified employee.⁸ The result flows onto Form 3800, General Business Credit, which aggregates the WOTC with any other business credits and applies them against your tax liability.⁹

Qualifying tax-exempt organizations follow a separate path. They file Form 5884-C to claim the credit against the employer’s share of Social Security tax rather than income tax, and only for wages paid to veterans. The IRS recommends that tax-exempt employers not reduce their payroll tax deposits in anticipation of the credit; the refund arrives after filing.⁴

If You Can’t Use the Credit This Year

If your business doesn’t owe enough tax to absorb the full credit, the amount isn’t lost. Unused WOTC can be carried back one year or carried forward up to 20 years.¹⁰ That matters especially now: credits earned on qualifying 2025 hires can still be applied against 2026 and later tax liabilities, even with the program dormant for new hires.⁴

State-Level Veteran Hiring Credits

Separate from the federal WOTC, a number of states offer their own tax credits for employers who hire veterans. Structures vary. Some states use flat per-hire amounts, others a percentage of wages. Credits generally run from around $1,000 to $5,000 per hire depending on the state, the veteran’s disability status, and how long the employment lasts. These programs sit under state tax codes with their own eligibility rules and filing requirements, so the current amount and availability come from the state’s department of revenue or workforce agency.

1
Office of the Law Revision Counsel. 26 U.S. Code 51 – Amount of Credit
2
Internal Revenue Service. About Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit
3
U.S. Department of Labor. Work Opportunity Tax Credit Eligibility Desk Aid
4
Internal Revenue Service. Work Opportunity Tax Credit
5
Office of the Law Revision Counsel. 26 U.S. Code 280C – Certain Expenses for Which Credits Are Allowable
6
Internal Revenue Service. Instructions for Form 8850
7
U.S. Department of Labor. How to File a WOTC Certification Request
8
Internal Revenue Service. Form 5884 – Work Opportunity Credit
9
Internal Revenue Service. Instructions for Form 5884 – Work Opportunity Credit
10
Office of the Law Revision Counsel. 26 U.S. Code 39 – Carryback and Carryforward of Unused Credits