Work Opportunity Tax Credit Extended to 2031, Adds Military Spouses, and Gets an Inflation Boost

The “Improve and Enhance the Work Opportunity Tax Credit Act” is a major overhaul and expansion of a key tax break for employers. This bill extends the Work Opportunity Tax Credit (WOTC) for another five years, pushing its expiration date from the end of 2025 to January 1, 2031. More importantly, it significantly increases the financial incentive for businesses to hire people from designated groups, like veterans, long-term unemployed, and certain recipients of public assistance.

The Inflation-Proof Pay Bump

Starting after 2025, the bill boosts the maximum credit employers can claim. Currently, the credit is calculated on the first $6,000 in wages paid to an eligible worker. This bill increases the credit rate from 40% to 50% of the first $6,000 in wages. For employees who work at least 400 hours, the credit also applies to the next $6,000 in wages—meaning the first $12,000 of a new hire’s salary is now eligible for a tax break. This is a substantial jump in value for businesses, especially small businesses looking to keep costs down.

Perhaps the biggest practical improvement for the long run is the addition of inflation adjustments (Sec. 2). Starting in 2026, the $6,000 and $10,000 wage caps used to calculate the credit will be adjusted annually based on cost-of-living increases. This means the WOTC won't slowly lose its value over time, which is a common problem with tax caps set in stone. For a business owner, this means the incentive remains strong and relevant years down the line.

New Faces in the Targeted Groups

This legislation adds a brand new group to the WOTC eligibility list: qualified military spouses (Sec. 3). This is a big deal for military families, who often face employment instability due to frequent moves. Now, any employer who hires a certified spouse of an active-duty service member can claim the tax credit. This change applies immediately upon enactment, offering a tangible incentive to hire a demographic often overlooked due to their transient lifestyle.

Another important change is the removal of an unnecessary restriction for SNAP recipients (Sec. 2). Currently, only SNAP recipients aged 40 or younger qualify for the credit. This bill scraps that age limit entirely. For employers, this expands the pool of eligible job seekers they can hire and claim the credit for. For older workers receiving food assistance, this removes a barrier that previously made them less attractive candidates for employers seeking the tax break.

Uncle Sam’s Hiring Push

Beyond tax incentives, the bill mandates a coordinated effort from four major federal agencies—Treasury, Commerce, Labor, and the Small Business Administration (SBA)—to actively promote the hiring of these targeted workers (Sec. 4). This isn't just a suggestion; they must specifically target business leaders in critical sectors like manufacturing, infrastructure, energy, health care, and construction. If you run a company in one of these industries, expect to hear more about how the WOTC can benefit your bottom line while helping you fill jobs.

The Practical Takeaway

For job seekers in these targeted groups—including veterans, military spouses, and long-term unemployed—this bill makes you a more attractive hire to employers because you come with a bigger tax incentive. For businesses, this is a clear signal that the government wants you to use this program, making it more valuable and easier to access. While these tax breaks reduce federal revenue (meaning taxpayers ultimately fund the credit), the goal is to offset that cost with increased employment and economic activity in key sectors.