2025 Tax Credits for Employers

Maximizing Your Business Tax Benefits

As we navigate the 2025 tax year, employers have several valuable tax credit opportunities that can significantly reduce tax liability while supporting important social initiatives. These credits reward businesses for hiring targeted groups, providing childcare assistance, and supporting employee education. Understanding these credits can help your business save money while making a positive impact on your workforce and community. Below, we outline the key employer tax credits available in 2025 and how to claim them.

Work Opportunity Tax Credit (WOTC)

The Work Opportunity Tax Credit provides employers with tax benefits when hiring qualified individuals from targeted groups. Employers who hire people from these groups can reduce the tax they owe when they claim the WOTC on their income tax return.

To qualify for this credit, individuals must be in their first year of employment and be certified as belonging to a targeted group. They must also perform at least 120 hours of service for the employer. It’s worth noting that certain wages may be taken into account for qualified veterans.

The WOTC is available for wages paid to certain individuals who begin work on or before a qualifying deadline. This credit serves as an incentive for employers to expand their hiring practices while helping individuals who have consistently faced barriers to employment.

Employer-Provided Childcare Credit

Employers who provide childcare services to their employees can benefit from the Employer-Provided Childcare Credit. This general business credit is limited to $150,000 per year and equals 25% of qualified childcare facility expenditures plus 10% of qualified childcare resource and referral expenses paid or incurred during the taxable year.

For a childcare facility to qualify, it must meet the requirements of all applicable laws and regulations of the state or local government in which it is located. The facility must be operated as a childcare facility, and various other conditions must also be met to ensure quality care for employees’ children.

This credit not only helps businesses reduce their tax burden but also supports working parents by making quality childcare more accessible and affordable. Employers who invest in childcare support often see improvements in employee retention, productivity, and job satisfaction.

Educational Assistance Programs

Forward-thinking employers can provide up to $5,250 in tax-free educational assistance to each employee per year through a written educational assistance plan. This benefit covers payments for tuition, fees and similar expenses, principal and interest payments on qualified student loans, as well as books, supplies, and equipment.

Educational assistance programs represent a win-win for employers and employees. Employees gain valuable skills and credentials without the full financial burden, while employers build a more skilled workforce and demonstrate their commitment to employee development.

The tax-free nature of these benefits makes them particularly attractive as part of a comprehensive employee benefits package. Remember that these tax-free benefits are limited to $5,250 per employee per year.

Resources for Employers

WOTC Resources

Employers interested in the Work Opportunity Tax Credit can visit IRS.gov/WOTC for detailed information. The process typically involves completing Form 8850, which serves as a pre-screening notice and certification request. Instructions for this form are available to help employers navigate the process correctly.

Tax credit employers use Form 5884 and Form 3800 to claim the credit as a general business credit. Tax-exempt employers have a different process and use Form 5884-C to claim credit when hiring qualified veterans.

Childcare Credit Resources

For the Employer-Provided Childcare Credit, employers should visit irs.gov/businesses/employer-provided-childcare-credit. The credit is claimed using Form 8882 (Credit for Employer-Provided Childcare Facilities and Services). Instructions for Form 8882 provide step-by-step guidance on claiming the credit.

Publication 15-B outlines most of the fringe benefits available to employees, including comprehensive information about the Employer-Provided Childcare Credit.

Educational Assistance Program Resources

Employers can learn more about educational assistance programs at www.irs.gov/forms-pubs/about-publication-970 . Key resources include Publication 15-B, which covers educational assistance programs, and Publication 970, which details tax benefits for education more broadly.

These publications help employers understand how to structure their educational assistance programs to comply with IRS requirements while maximizing benefits for both the business and employees.

Sharing Information About Tax Credits

As an employer or tax professional, you can help spread awareness about these valuable tax credits. Consider including links to IRS resources on your company website and sharing relevant information in your company newsletter.

Social media provides another effective channel for sharing messages about these tax credits. The IRS provides ready-to-use materials that can be shared across various platforms.

By promoting awareness of these tax benefits, you not only help your own business but also support other employers in your network who may benefit from these credits.