The Work Opportunity Tax Credit Lapsed Again on December 31, 2025 — What Construction Employers Should Still Do

The Work Opportunity Tax Credit — the federal program that's paid employers to hire veterans, people coming out of long-term unemployment, and a handful of other groups who've struggled to find work — lapsed again on December 31, 2025. If you run a construction company and haven't heard, you're not alone, and you're not necessarily losing anything yet. WOTC has lapsed and been retroactively revived by Congress several times before, going back to the early 2010s, and the smart move for a contractor right now is to keep doing the paperwork exactly as if the credit were still live, because history says it probably will be again.

What WOTC Actually Pays For

WOTC is a federal tax credit under Section 51 of the Internal Revenue Code, jointly run by the IRS and the Department of Labor. When an employer hires someone certified as a member of one of ten targeted groups — including qualified veterans, people who've been unemployed long-term, SNAP recipients, ex-felons, and vocational rehabilitation referrals — the employer can claim a credit equal to 40% of up to $6,000 of that employee's first-year wages, as long as the employee works at least 400 hours. That caps the standard credit at $2,400 per qualifying hire. For certain qualified veterans, the wage base used to calculate the credit climbs as high as $24,000, which can push the credit itself above $6,000 for a single hire. A reduced 25% rate applies if the employee works at least 120 hours but fewer than 400.

That's real money for a construction company running a crew of laborers, flaggers, equipment operators, or shop hands, especially one that's been actively trying to hire veterans or give someone coming out of incarceration or long-term unemployment a real shot. Construction has historically been one of the more willing industries to hire from these groups, partly because the skills gap between 'never done this job' and 'productive crew member' closes faster on a jobsite than in a lot of white-collar roles.

The ten targeted groups cover more ground than most owners realize. Beyond qualified veterans, they include: people receiving Temporary Assistance for Needy Families; ex-felons hired within a year of conviction or release; residents of designated Empowerment Zones or Rural Renewal Counties between ages 18 and 39; people referred after completing a vocational rehabilitation program through a state plan, the Ticket to Work program, or the VA; summer youth employees aged 16-17 living in an Empowerment Zone; SNAP recipients aged 18-39; SSI recipients; long-term family assistance recipients; and people unemployed for 27 consecutive weeks or more who received unemployment compensation during that stretch. A crew that includes even a couple of hires from these categories in a given year can add up to a meaningful credit once certifications clear.

Why It Lapsed, and Why That's Not New

WOTC's current authorization came from the Consolidated Appropriations Act, 2021, which extended the credit for wages paid to workers who began work on or before December 31, 2025. Congress didn't pass a further extension before that date, so as of this writing, the credit's statutory authorization has expired. This isn't the first time. WOTC has lapsed and been renewed retroactively multiple times over the past two decades, including stretches in the early-to-mid 2010s where the credit was dead for a full calendar year before Congress reinstated it and let employers claim it retroactively for all the qualifying hires made during the gap.

That retroactive pattern is exactly why the paperwork discipline matters right now. If Congress renews WOTC again — and nothing about this lapse looks different from the prior ones that got revived — the credit will almost certainly apply retroactively to hires made during the lapse, the same way it has before. But only if those hires were properly pre-screened and certified at the time.

Qualified tax-exempt employers have a slightly different path: they can only claim WOTC against the employer's share of Social Security tax, and only for qualified veteran hires, filed on Form 5884-C rather than the standard Form 5884. Most construction companies are taxable employers and claim the credit as part of the general business credit on Form 3800, where unused credit can be carried back one year or forward up to twenty — useful if a lean year means you can't use the full credit against that year's tax liability.

What To Keep Doing While the Credit Is Lapsed

• Keep having every new hire complete IRS Form 8850 (the Pre-Screening Notice and Certification Request) on or before the day you make the job offer — this is the single most time-sensitive requirement in the whole program, and it cannot be done retroactively after the fact once the offer date has passed.

• Keep submitting Form 8850 to your state workforce agency within 28 days of the employee's start date, even though certifications may sit in a processing queue until Congress acts.

• Keep a simple internal log of which new hires you believe qualify and why (veteran status, SNAP enrollment, long-term unemployment, etc.), so your bookkeeper or CPA isn't reconstructing it from memory six months from now if a retroactive extension passes.

• Don't change your hiring practices because of the lapse — a contractor who stops hiring veterans or giving someone leaving incarceration a shot because 'the credit's not available right now' is leaving both the right hire and the eventual retroactive credit on the table.

The Real Cost-of-Labor Picture for Construction Employers

WOTC was never going to make or break a hiring decision on its own, and it shouldn't be the reason you bring someone onto a crew. But it's one of several pieces — alongside state workforce-development grants, apprenticeship wage subsidies, and your own training pipeline — that change the real cost of building a crew big enough to run the equipment you're financing. A $2,400 credit against a qualifying hire's first-year payroll tax liability is roughly what it costs to put that same hire through a week of certified equipment training, which is exactly the kind of math that should factor into whether you're staffing up ahead of adding a second excavator or a new dump truck to the fleet rather than after.

There's a sequencing lesson in here too. A lot of contractors make the equipment decision first — buy or finance the machine, then figure out who's going to run it — and end up either paying overtime to stretch an existing operator thin or rushing a hire who isn't fully trained yet. Flip that order when you can. If you know a bigger backlog is coming, start the WOTC pre-screening and the broader hiring push a few weeks ahead of the equipment delivery, so the new hire has ramp-up time on a smaller machine before stepping onto whatever you're financing next. It costs you nothing extra in financing terms and it means the new piece of equipment is productive from week one instead of week six.

Don't Let the Lapse Change Your Growth Plans

The practical takeaway is simple: treat WOTC the same way you'd treat a tax provision that expires and gets extended on a schedule you can't fully predict — keep the paperwork current, keep hiring the way you were hiring, and let your CPA sort out the retroactive claim whenever Congress acts. What you shouldn't do is let a federal tax-credit lapse slow down decisions that are really about whether your fleet matches your backlog. If you're adding crew because you're adding equipment, or adding equipment because you finally have the crew to run it, BFC Equipment Loans works with construction equipment financing decisions like that every day — startups and established companies, nationwide, credit situations of every kind.

Two related reads worth a look while you're thinking through labor cost and fleet growth together: how Davis-Bacon prevailing wage requirements change your math on public jobs, and the real difference between a dealer's floor plan financing and your own retail equipment loan when you're shopping for the next machine.

One more wrinkle worth flagging to whoever runs your payroll: WOTC wages generally can't be double-counted toward other wage-based credits for the same hire, though you can often stack WOTC with a different credit as long as you're using separate wages to calculate each one. If your state also runs its own hiring incentive — several states layer a state-level credit for veterans or apprentices on top of the federal one — that's worth checking with your CPA alongside the WOTC paperwork, since state programs generally don't depend on whether the federal credit is currently authorized.

Keep the Paperwork, Keep Growing

WOTC lapsing on December 31, 2025 is a Congress problem, not a construction-company problem, as long as you keep doing the pre-screening and certification work now so you're ready if and when the credit gets renewed retroactively — which recent history says is the likely outcome. In the meantime, keep building the crew and the fleet that actually match the work you've got coming.

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