Business Tax Credits for Disability Access Updates
How the Disability Access Tax Credit Works for Businesses
UPDATE: The 2017 Tax Cuts and Jobs Act has eliminated the disability access tax credit, effective with the 2018 tax year. This information is provided for those who may be in process of claiming this tax credit for a previous year.
Since the Americans with Disabilities Act (ADA) was enacted in 1990, employers have been required to make their workplaces accessible to employees and customers with disabilities.
Since the cost of making these accommodations to your business can be expensive, the IRS allows small businesses to deduct a portion of the cost of property you buy and upgrades you make for this purpose. The deductions, in this case, are a tax credit for 50% of the allowable amount for eligible expenditures.
In addition to the tax credit, you may also be eligible for a tax deduction for expenses of removing barriers to access.
Here are several factors to consider before you run out and buy equipment or building improvements:
Is My Small Business Eligible for This Tax Credit?
First, you will need to determine if your small business qualifies for the credit. For the purposes of this credit, the IRS says that a qualifying small business must have gross receipts (fewer returns and allowances) of less than $1 million for the preceding year, or had no more than 30 full-time employees.
What Kinds of Updates are Covered?
Second, look at the types of improvements you have made or want to make to improve access for those with disabilities. You can receive the tax credit for improvements to your business which remove barriers, like making a restroom door wider, and for new or modified equipment or devices to help disabled individuals. You may also be eligible for credit for interpreters (for a hearing-impaired employee, for example) or means of helping a visually-impaired employee see better.
These types of upgrades are eligible for the tax credit:
- Removing barriers that prevent a business from being accessible to or usable by individuals with disabilities;
- Providing qualified interpreters or other methods of making audio materials available to hearing-impaired individuals;
- Providing qualified readers, taped texts, and other means of making visual materials available to individuals with visual impairments; or
- Buying or modifying equipment or devices for individuals with disabilities.
What is the Barrier Removal Tax Deduction?
The IRS also has an Architectural Barrier Removal Tax Deduction to encourage removal of barriers to mobility for disabled and elderly. You can deduct up to $15,000 a year for qualified expenses. It is a significant benefit because usually, these expenses would have to be capitalized (depreciated over several years), and this deduction allows you to claim the expenses in the first year.
You can claim both the disability access tax credit and the barrier removal tax deduction in the same year if the expenses meet the requirements of both sections. The barrier reduction deduction makes up the difference between the maximum tax credit and the amount you have spent.
So, for example, if you spent $15,000 on removing barriers at your business location, you can claim $10,000 in the tax credit and the other $5,000 in the tax deduction.
Read this section of IRS Publication 535 - Business Expenses, to find out more about the requirements for this tax deduction.
How Much Tax Credit Can I Get?
So you have determined that your business qualifies and that the types of improvements also qualify for the tax credit. You can take a tax credit for 50 percent of eligible expenditures (noted above) over $250 up to $10,000 a year. So your tax bill can be reduced by up to $5,000.
How Do I Apply for the Credit?
You apply for the disability access tax credit on your business tax return, using IRS Form 8826. The form is simple to fill out.
- Enter the total eligible access expenditures on line 1.
- If the amount on Line 1 is less than $250, you can raise the amount to $250.
- If the amount is more than $10,000, you are only eligible for $10,000.
- Multiply the amount ($10,000 or less) by 50% to get the tax credit amount.
Finally, you enter the amount of the credit on Form 3800, the General Business Credit form, along with other tax credits for which your business is applying.
Remember this is just an application. You must follow IRS guidelines to receive these tax credits; the IRS checks to see that the credit is not abused. Don't buy anything or do anything expecting to get the tax credit without checking first with your CPA or tax advisor.
For more information on this tax credit, see IRS Form 8826, the application form for disability access tax credits.