Do Companies Get Tax Breaks for Hiring Disabled Veterans?

Companies that hire disabled veterans can claim a federal tax credit worth up to $9,600 per hire through the Work Opportunity Tax Credit (WOTC). The exact amount depends on the veteran’s circumstances and how many hours they work in their first year. Under current law, the credit only applies to employees who start work on or before December 31, 2025, so any business planning to rely on this tax break for hiring disabled veterans in 2026 should first confirm that Congress has extended the program.¹

How Much the Credit Is Worth

Two of the five WOTC veteran categories are built specifically around service-connected disability, and they carry the highest wage caps in the entire program.

A disabled veteran hired within one year of discharge: wages up to $12,000 count toward the credit, for a maximum credit of $4,800.
A disabled veteran who has been unemployed for at least six months in the year before being hired: wages up to $24,000 count, for a maximum credit of $9,600.

That $9,600 figure is the largest credit available anywhere in the WOTC program, across every targeted group.¹

The percentage you can claim depends on hours worked. The veteran must work at least 120 hours before any credit is available. Between 120 and 399 hours, the credit is 25% of qualified first-year wages. At 400 hours or more, it jumps to 40%. The dollar maximums above assume the 40% rate.¹

The WOTC is a credit, not a deduction, which means it reduces the tax bill directly rather than the income the tax is calculated on. Taxable businesses apply it as a general business credit against income tax. Qualifying tax-exempt organizations can apply it only against the employer’s share of Social Security tax on wages paid to the qualifying veteran.²

Which Disabled Veterans Qualify

To trigger the credit, the person you hire has to meet the tax code’s definition of a veteran and be entitled to compensation for a service-connected disability. Being entitled to compensation for a service-connected disability means the person carries a disability rating from the Department of Veterans Affairs for an injury or condition tied to their military service. Both terms are defined by reference to Title 38 of the U.S. Code, the body of law that governs veterans’ benefits.³

A veteran, for WOTC purposes, is someone who served on active duty (not counting training) for more than 180 days, or who was discharged because of a service-connected disability. There’s an additional timing rule: the veteran cannot have been on extended active duty of more than 90 days within the 60 days before the hire date. That rule is meant to steer the credit toward hiring people transitioning to civilian work.³

To fall into the $4,800 tier, the veteran must be hired within one year of discharge from active duty. For the $9,600 tier, the veteran must also have been unemployed for at least six months (which do not need to be consecutive) during the year before the hire date.¹

Hires That Do Not Count

You can’t claim the credit for rehiring a former employee, no matter how well they qualify on paper. You also can’t claim it for hiring close relatives: a child, sibling, parent, or other close relative of the business owner (or of anyone who holds more than 50% of the company) is excluded, as are dependents of the owner. The rule stops owners from generating credits by putting family on payroll.⁴

The Wage Deduction Tradeoff

One rule surprises employers doing this for the first time. When you claim the WOTC, you have to reduce your wage deduction for that employee by the amount of the credit. If a disabled veteran generates a $4,800 WOTC, you lose $4,800 of the wage deduction you would otherwise have taken. At a 21% corporate tax rate, that lost deduction would have saved you about $1,008, so the net benefit works out closer to $3,792 than the headline $4,800. The credit is still worth more than the deduction alone, but the effective savings are smaller than the sticker number implies.⁵

How to Claim the Credit

Claiming the WOTC is a two-stage process. First, get the employee certified through your state. Then claim the credit on your federal tax return. The deadlines in the first stage are strict, and missing one disqualifies the hire.

Pre-Screening on or Before the Offer

On or before the day you make the job offer, the applicant fills out IRS Form 8850, a short questionnaire that flags whether they belong to a WOTC-targeted group. The timing is not flexible. The form must be completed on or before the offer date, not after. Many employers fold Form 8850 into their standard application packet so this window is never missed.⁶

You’ll also need one of two Department of Labor forms. ETA Form 9061, the Individual Characteristics Form, is completed by the employer with details on the veteran’s qualifying circumstances. ETA Form 9062, the Conditional Certification Form, is used when the applicant has already been pre-screened by a State Workforce Agency.⁷

The 28-Day Filing Window

Once the veteran starts work, you have 28 calendar days to send the signed Form 8850 and the accompanying ETA form to your State Workforce Agency. Miss that deadline and the credit is gone for that hire. There’s no built-in appeal. Some states accept electronic filings and some don’t; check with your state’s WOTC coordinator to see what’s available.⁷⁸

Waiting for Certification

The State Workforce Agency reviews the paperwork, verifies eligibility, and issues a certification if the hire qualifies. Processing times vary widely by state, from a few weeks to many months. You don’t need the certification in hand to file your tax return, but you do need it before you actually claim the credit. If it arrives after you’ve already filed, you can amend the return.

Filing With Your Return

Taxable employers calculate the credit on IRS Form 5884 and report it on Form 3800, the General Business Credit, as part of the annual income tax return. Tax-exempt organizations use Form 5884-C to claim the credit against their share of Social Security tax on the qualifying veteran’s wages.⁹

Hang on to the SWA certification, the submitted forms, payroll records showing first-year wages, and documentation of hours worked for each qualifying veteran. The general statute of limitations for tax returns is three years, so keep records at least that long.¹⁰

If the Credit Exceeds Your Tax Bill

For taxable businesses, an unused WOTC isn’t lost. As a general business credit, the excess can be carried back one year or carried forward up to 20 years.¹¹ Tax-exempt organizations do not get a carryback or carryforward. Their credit is capped at the employer’s share of Social Security tax on qualifying wages for that year.²

Program Status Through 2025 and Beyond

The WOTC is currently authorized through December 31, 2025.² Employers who hire qualifying disabled veterans in 2025 or earlier can still claim the credit on their returns for those wages even if the program isn’t renewed. As of early 2025, bipartisan bills have been introduced in both chambers of Congress to extend the WOTC through 2030, but no extension has been enacted.¹²

State Credits on Top of the Federal One

The federal WOTC isn’t the only tax break available for hiring veterans. A number of states offer their own veteran-hiring credits, often stackable with the federal one. State credits for veteran hiring typically range from a few thousand dollars to $20,000 per hire, with eligibility rules that differ from state to state. Your state’s department of revenue or workforce agency can tell you what’s on offer locally.

1
Internal Revenue Service. Work Opportunity Tax Credit
2
Internal Revenue Service. The Work Opportunity Tax Credit Is Available Until the End of 2025
3
Office of the Law Revision Counsel. 26 USC 51 – Amount of Credit
4
Office of the Law Revision Counsel. 26 U.S. Code 51 – Amount of Credit
5
Office of the Law Revision Counsel. 26 U.S. Code 280C – Certain Expenses for Which Credits Are Allowable
6
Internal Revenue Service. About Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit
7
U.S. Department of Labor. How to File a WOTC Certification Request
8
Internal Revenue Service. Instructions for Form 8850
9
Internal Revenue Service. About Form 5884, Work Opportunity Credit
10
U.S. Department of Labor. Updated Work Opportunity Tax Credit (WOTC) Procedural Guidance
11
Office of the Law Revision Counsel. 26 U.S. Code 39 – Carryback and Carryforward of Unused Credits
12
Congress.gov. H.R.1177 – 119th Congress (2025-2026): Improve and Enhance the WOTC Act