According to the IRS, the Work Opportunity Tax Credit for veterans expired on December 31, 2025.
That matters. But if you stopped screening veteran applicants for it, you made a mistake.
WOTC has lapsed before. Multiple times. It came back every time, usually retroactively, covering hires made during the gap. Congress appropriated $17.5 million in February 2026 specifically to keep state workforce agencies staffed and ready to process certifications. You don't fund the bureaucracy to administer a dead program.
Here's what operators need to understand about veteran hiring, the tax play, and the business case that exists regardless of what Congress does.
What WOTC paid, and likely will again
The Work Opportunity Tax Credit let employers reduce their federal tax liability for hiring from specific target groups. For veterans, the credit ranged by category:
- Standard veteran hire: 40% of first-year wages up to $6,000: a maximum credit of $2,400.
- Veterans unemployed six months or longer: 40% of wages up to $14,000: a maximum credit of $5,600.
- Service-connected disabled veterans unemployed six months or longer: 40% of wages up to $24,000: a maximum credit of $9,600.
Those are not rounding errors. A business that hired three service-disabled veterans who had been job-hunting for six months could have claimed $28,800 in federal tax credits in a single year. At a 21% corporate tax rate, that's real money against a real liability.
The credit operated by reducing what you owed the IRS dollar-for-dollar. Not a deduction. A credit. For qualified veterans, the employer claimed it on IRS Form 5884, and qualifying required a pre-screening certification through the state workforce agency within 28 days of hire.
Pending legislation, the Improve and Enhance WOTC Act, would raise the maximum veteran credit from $9,600 to $12,000 and add military spouses as a new eligible category. That bill hasn't passed. But the fact that it exists tells you where Congressional intent sits. This program isn't dead. It's in a lapse that history says resolves.
What to do right now
Screen every veteran hire anyway.
Use IRS Form 8850 (Pre-Screening Notice and Certification Request) within 28 days of each hire date. Submit to your state workforce agency. States are collecting and preparing documentation during the hiatus. According to Department of Labor guidance issued in April 2026, states "can continue to review and prepare WOTC certification requests when there is a WOTC authorization lapse."
They just can't issue certifications until Congress acts.
When reauthorization passes (the $17.5 million in administrative appropriations is a strong signal that it will), employers with clean documentation will claim retroactive credits on the day it becomes law. Employers who stopped the process will spend weeks reconstructing hire records for 12 to 18 months of eligible veterans.
Running the screening process costs you an administrative form per hire. Stopping it could cost you several thousand dollars per eligible hire that you can't recover.
This is a process discipline question. Keep the process.
Federal contractors carry a harder obligation
If your business holds federal contracts worth $150,000 or more, WOTC eligibility is the floor, not the ceiling.
VEVRAA, the Vietnam Era Veterans' Readjustment Assistance Act, requires covered contractors to take affirmative action to recruit, hire, promote, and retain veterans. The Department of Labor sets a national hiring benchmark. It currently stands at 5.1% of your total workforce.
That is a benchmark, not a quota. Missing 5.1% doesn't trigger automatic penalties. But if your veteran workforce percentage falls below it, OFCCP auditors will examine your outreach documentation. They look for job postings on the National Labor Exchange, engagement with Transition Assistance Program events, and partnerships with veteran service organizations. The evidence trail matters more than the percentage in practice.
Federal contracting is one of the most viable growth paths for small businesses operating in the lower middle market. Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) and Veteran-Owned Small Businesses (VOSBs) receive set-aside contract access through VA's VetCert program. We covered the SDVOSB certification process in detail separately. If you're building toward federal work, your internal veteran hiring practices need to match your external positioning. Your documentation needs to survive an audit.
What the data actually shows
The Bureau of Labor Statistics reported that the overall veteran unemployment rate was 3.0% in 2024, compared to 3.9% for nonveterans. Veterans in the civilian workforce are employed at higher rates than their non-veteran peers. That gap isn't statistical noise. It reflects selection effects and the actual skills military service builds.
There are 17.6 million veterans in the U.S. civilian population. Each year, roughly 200,000 service members separate from active duty. Many are underemployed inside the first two years of transition: working the floor when they could own it, running equipment when they could manage the team running it.
The RAND Corporation studied WOTC's 2007 expansion and found it increased disabled veterans' employment by two percentage points in 2007 and 2008, representing roughly 32,000 additional jobs each year, and improved annual wage income by 40 percent. Tax credits change employer behavior at scale. That's what the data shows.
The VA's on-the-job training program
WOTC's lapse doesn't touch the VA's On-the-Job Training (OJT) program. That program is active and funded separately.
VA OJT subsidizes wages for veterans entering new civilian roles during a structured training period. The subsidy covers a declining percentage of the journeyman wage, typically starting at 75% in the early months and stepping down as the veteran approaches full proficiency. Employers get a skilled hire at a reduced labor cost during the learning curve. Veterans build documented competency in a new field.
This is worth flagging at offer. If you're hiring a veteran transitioning into a new trade, professional role, or operational function, confirm whether they're enrolled in GI Bill benefits through VA. Many veterans don't know the OJT benefit applies to civilian employment, not just school.
The process runs through the VA regional office. The veteran initiates it. Your role is to have a written training plan and track hours. The administrative lift is modest. The labor cost offset is not.
Building the intake process
Veterans don't come pre-packaged for civilian corporate environments. That's actually the point.
They're accustomed to flat structures where competence outranks title. They're trained to brief up when a plan isn't working. Not to protect the plan. In small-to-midsize businesses where the org chart is thin and speed matters, that orientation is a genuine competitive advantage.
The friction point is the first year. Research from the Institute for Veterans and Military Families at Syracuse University shows elevated turnover in the first 12 months when veterans land in roles that don't map to their actual skills. The gap isn't performance. It's translation. Military resumes describe jobs in terms of systems, missions, and personnel managed. Civilian hiring managers read tasks.
The fix is straightforward: ask better intake questions. What did you own the outcome on? What happened when the plan broke? What's the largest team you held accountable?
The answers will be specific and concrete. That's how people trained under consequence speak.
Operators who take 30 minutes to understand a veteran's actual scope of responsibility before assigning them to a role will retain them. Operators who don't will lose them inside the first year and wonder why the hire didn't work.
The operator's take
WOTC gives you a financial incentive to hire veterans. The business gives you a performance reason. Both are real.
The credit is in hiatus, not dead. The $17.5 million appropriated for state administration in February 2026 is the tell. Congress funds the pipeline when they intend to reopen it. Operators who keep screening will be positioned to claim retroactive credits the day reauthorization passes. Operators who stopped will have left money on the table across every eligible hire from January 2026 forward.
The process discipline is simple: Form 8850, within 28 days, to your state workforce agency, for every veteran hire. Log the submission. Keep the documentation clean.
When the credit comes back, you'll have the paper trail. The operators who don't will be reconstructing records for 18 months of hires, and some of those records won't exist anymore.
That's a process failure. It's avoidable.
Zack Knight is a Special Forces veteran (18-series, U.S. Army) and partner contributor at Patriot Growth Capital, a veteran-founded private equity firm operating in the lower middle market. Patriot Growth Capital directs 5% of revenue to veteran community organizations and is affiliated with ATLVets in Atlanta, Georgia.
