If you run a small electrical, plumbing, HVAC or general contracting shop, you have probably heard that the government will pay you to train apprentices. Part of that is true. In 2026 the money comes from three places: a state apprenticeship tax credit (if your state has one), federal workforce dollars that reimburse wages while a new hire learns, and a handful of smaller programs that lower the cost or risk of hiring. The federal hiring credit most employers knew, WOTC, is in limbo. This guide sorts out what is real, what has lapsed and what order to apply in so you do not miss a deadline.
Is there a federal apprenticeship tax credit?
No. There is no federal income tax credit that pays you a set amount per registered apprentice. Bills to create one keep coming back. The most recent is the LEAP Act, H.R. 1662, introduced on February 27, 2025. As written, it would give employers $1,500 per apprentice, but only for apprentices above 80% of the employer's average apprentice headcount over the prior three years, and only for two tax years per apprentice. In other words, it is designed to reward growth, not to pay you for the apprentices you already have.
Until something like that is enacted, ignore any article or vendor pitch that promises a federal per-apprentice credit. The federal help that exists today runs through workforce grants and wage reimbursement, which we cover below.
State apprenticeship tax credits worth checking
The Department of Labor keeps a state-by-state list of apprenticeship tax credits. It currently shows about 21 states with an apprentice-specific credit. The amounts and rules vary widely, and several are tied to specific industries or to registered programs only. A sample of what is listed:
| State | What the credit looks like | Catch to watch for |
|---|---|---|
| South Carolina | Greater of $1,000 or the apprenticeship's cost per year; up to $4,000 per apprentice ($6,000 for a youth apprentice), plus $1,000 a year for up to three years if the graduate stays on | Apprentice must be employed at least seven months of each year; claimed on Form TC-45 |
| Colorado | Refundable credit up to $12,600 per apprentice per year, up to ten apprentices | Only for "New and Emerging" occupations in a Colorado registered program; 1,040-hour minimum; reservation required first |
| Ohio | Lesser of $5,000 per employee or 15% of wages | Statewide cap of $5 million per biennium |
| Connecticut | Lesser of $7,500 or 50% of wages | Manufacturing programs of 4,000 to 8,000 hours |
| Illinois | Up to $3,500 per apprentice in education expenses, plus $1,500 in underserved areas | Non-refundable; covers education costs, not wages |
| Kansas | $2,500 per apprentice, up to 20 | Claimed after the apprentice finishes probation |
| Montana | $750 per apprentice, $1,500 for a veteran | Starts after probation or six months |
| West Virginia | $2 per hour worked, capped at the lesser of $2,000 or 50% of wages | Program must be 2,000 to 10,000 OJT hours |
| Louisiana | $2.50 per hour, up to $2,500 per worker | New for 2026 hours; applications open in early 2027; $1 million annual cap |
Two cautions. First, some state listings are stale. The DOL page itself notes that Alabama's credit was set to sunset and that New York's was shown as available through 2022, so always confirm with your state revenue department before you count on a number. Second, many state credits apply only to registered apprenticeships. If your apprentices are informal helpers, the credit usually does not apply. If you are weighing whether a formal program is worth it, our piece on hiring an apprentice versus an experienced hand lays out the tradeoff.
South Carolina is the clearest example for contractors. The state raised its credit in 2024, according to the SC Department of Revenue. A four-year electrical or plumbing apprentice who stays on after completion can now be worth several thousand dollars in credits to a small shop, which is real money against tuition and supervision time.
WIOA on-the-job training: wage reimbursement for new hires
For most small trade employers, this is the biggest and most overlooked incentive. Under the Workforce Innovation and Opportunity Act, your local workforce development board can sign an on-the-job training (OJT) contract with you. You hire an eligible job seeker, train them on the job, and the board reimburses part of their wages during the training period.
The federal rules in 20 CFR Part 680, Subpart F set the basics:
- Reimbursement is generally up to 50% of the trainee's wage rate.
- A governor or local board can raise it to as much as 75% after weighing factors such as the trainee's barriers to employment, the quality of the training and the size of the employer, with an emphasis on small businesses.
- You do not have to document your actual training costs. The payment is treated as compensation for supervision and lower productivity.
- The contract runs only as long as the trainee needs to become proficient.
- Registered apprenticeship sponsors can use OJT contracts for the on-the-job portion of an apprenticeship, and classroom instruction can be paid with separate training accounts.
Some states go further under federal waivers. Wisconsin's policy, for example, allows up to 90% reimbursement for employers with 50 or fewer employees through June 30, 2028. Rates differ by local board, so ask yours directly.
The catch: the board must approve the hire before the person starts, and the trainee has to be WIOA-eligible. If you have a track record of taking OJT money and then letting trainees go, the rules bar new contracts with you. To start, call your local American Job Center and ask for the business services team.
The Work Opportunity Tax Credit in 2026: lapsed, but keep filing
WOTC gave employers a federal credit for hiring people from target groups such as veterans, SNAP recipients, people with felony convictions and the long-term unemployed. According to the Congressional Research Service, it expired on December 31, 2025. People hired after that date do not currently qualify, and states may not issue certifications during the lapse.
Why mention it at all? Because Congress has renewed WOTC retroactively after past lapses, and a bipartisan bill, S. 492, would extend and expand it. Some states are still accepting applications for 2026 hires and holding them until reauthorization; California's workforce agency says exactly that on its WOTC page. The filing rule that mattered before still matters: IRS Form 8850 goes to your state WOTC coordinator within 28 days of the hire's start date. If you skip the paperwork now and the credit comes back retroactively, you may not be able to claim it.
For reference, when it was in force the credit was typically 40% of up to $6,000 in first-year wages (a maximum of $2,400) for a hire who worked at least 400 hours, rising to as much as $9,600 for certain disabled veterans.
Smaller incentives that still help
Federal Bonding Program
If you hesitate to hire someone with a criminal record or a shaky work history for a job with access to tools, materials or customer homes, the Federal Bonding Program provides a free $5,000 fidelity bond covering the first six months of employment, with no deductible. It protects against theft, forgery and embezzlement, and there is no application for the employer to fill out. Your state bonding coordinator issues it.
Tax-free education assistance
Under Section 127, you can pay up to $5,250 a year per employee toward tuition, fees, books, supplies and equipment, and the employee owes no income tax on it. The One Big Beautiful Bill Act made student loan repayment a permanent part of this benefit and indexes the $5,250 cap to inflation starting in 2027. For a trade employer, that covers related classroom instruction or a licensing prep course without adding taxable income to an apprentice's paycheck. You need a written plan to use it.
State apprenticeship expansion grants
In April 2026 the Department of Labor sent about $85 million to states and territories through State Apprenticeship Expansion Formula grants. States must reserve part of that money for employers and apprentices in their priority industries. What it pays for depends on your state, but it often covers program setup, related instruction or wage support. Your state apprenticeship office is the place to ask.
How to stack incentives without missing a deadline
Most of these programs can be combined, but they have strict timing. The order matters more than the amounts.
- Before you post the job: Call your local workforce board's business services team. Ask whether they have WIOA-eligible candidates and what OJT reimbursement rate they offer small employers.
- Before you make an offer: If you plan to run a registered apprenticeship, confirm your program is registered (or start the process) so state credits apply.
- On or before the start date: Sign the OJT contract. Reimbursement does not reach back to before the agreement.
- Within 28 days of the start date: Have the hire complete Form 8850 and file it with your state WOTC office, even while the credit is lapsed.
- During the first six months: Request a federal bond if the hire is eligible and you want the coverage.
- At tax time: Claim your state apprenticeship credit, keeping proof of the hours and months worked that your state requires.
If you are budgeting for a new hire, our recruiting cost breakdown shows where these offsets fit against ad spend and onboarding time.
Bottom line
For a small trade employer in 2026, the realistic incentive stack is a WIOA OJT contract plus a state apprenticeship tax credit if your state offers one. Together, those can cover a meaningful share of a first-year apprentice's cost. Treat WOTC as a maybe, file the paperwork anyway, and do not plan around a federal apprenticeship credit until one actually becomes law. Your first call should be to your local workforce board, not your accountant.