Work Opportunity Tax Credit Extended to 2031, Adds Military Spouses, and Boosts Employer Incentives

If you’re running a business or looking for work after a tough break, this bill is worth paying attention to. The Improve and Enhance the Work Opportunity Tax Credit Act is a major update to the Work Opportunity Tax Credit (WOTC), a program that gives employers a tax break for hiring people who often face significant barriers to employment. This bill doesn't just renew the program; it significantly upgrades it, extending the credit’s availability until January 1, 2031, and increasing the potential value for companies that hire from targeted groups (Sec. 2).

The Credit Gets a Raise and a Cost-of-Living Adjustment

Starting in 2026, the WOTC gets a significant boost. For most new hires, the credit is increasing from 40% to 50% of the first $6,000 in qualified wages. Even better, there’s a new tier: employers can claim an additional 50% credit on the next $6,000 of wages, provided the employee works at least 400 hours. This effectively doubles the wage base that qualifies for the credit, making the incentive much stronger for hiring and retaining these workers. To keep this incentive relevant, the bill introduces annual inflation adjustments to the key dollar amounts starting after 2025, which means the credit will hold its value over time—a smart move for long-term planning (Sec. 2).

Who Qualifies Now? Two Big Changes

This bill makes the WOTC available to two major groups previously excluded or limited. First, it removes the age cap for SNAP recipients (Supplemental Nutrition Assistance Program, formerly food stamps). Currently, only SNAP recipients under age 40 qualify for the credit. This bill deletes the phrase “but not age 40” from the tax code, meaning older workers receiving SNAP benefits are now a qualifying hire, effective 2026 (Sec. 3). This is a huge win for experienced workers over 40 who are re-entering the workforce.

Second, the bill creates a brand new targeted group: qualified military spouses. Any individual certified as the spouse of an active member of the U.S. Armed Forces now qualifies for the WOTC (Sec. 4). This acknowledges the employment challenges military families face due to frequent moves and gives employers a direct incentive to hire this highly capable but often overlooked group. This change applies immediately upon enactment.

The Catch: Temporary Workers Take a Hit

While the credit is enhanced for most hires, there’s a specific reduction for short-term employees. For individuals who work between 120 and 400 hours—think seasonal or very temporary roles—the credit percentage is reduced from 40% down to 25% of qualified first-year wages (Sec. 2). For employers who rely on a high volume of very short-term hires, this change could slightly dampen the incentive compared to the current rules.

Targeting Critical Industries

Beyond the tax code changes, the bill mandates a coordinated effort between the Treasury, Commerce, Labor, and Small Business Administration to promote the hiring of these targeted groups in specific, critical sectors. The focus is on leaders in Manufacturing, Infrastructure, Energy, Health care, and Construction (Sec. 5). This isn't a new tax break, but a directive to federal agencies to actively connect the WOTC program with industries facing major workforce needs. For someone looking for a job in healthcare or construction, this means these employers will likely be hearing a lot more about the financial benefits of hiring them.