Reaching as many customers as possible is every small business owner’s goal.
And if you’re a business owner who’s doing your best to remove barriers for customers and employees with disabilities, then in addition to expanding your business’ reach, you might also qualify for extra tax credits and deductions. In this article, I’ll explain how businesses can receive tax benefits for supporting accessibility in compliance with the Americans with Disabilities Act (ADA).
What types of tax credits and deductions can business owners receive for ADA compliance?
There are several federal tax credits and deductions available to business owners who make their businesses comply with ADA guidelines. Before we get to the list, remember that a tax credit reduces how much you owe in taxes, and a tax deduction reduces your taxable income. Both are fabulous, and you want to have as many of each as you can.
Disabled Access Credit
The Disabled Access Credit is a non-refundable credit available for small businesses that incur necessary and reasonable expenses related to providing access to people with disabilities. The credit is equal to 50% of your eligible expenses up to a maximum of $5,000, with no credit for the first $250.
In order to be eligible for this credit, your business must have earned less than $1 million and had no more than 30 full time employees in the previous year. This is not a one-time credit and can be taken in any year when your company has access expenses.
Some expenses that qualify for the Disabled Access Credit are:
- Making your website accessible for people with disabilities
- Removing physical barriers that prevent a business from being accessible or usable by people with disabilities (replacing stairs with a ramp or widening a doorway)
- Providing qualified sign language interpreters
- Providing audio materials or headphones for people with hearing impairments
- Providing readers, audio tapes, or other materials for people with visual impairments
- Providing equipment or devices to assist people with disabilities
To claim the Disabled Access Credit, complete and attach Form 8826 to your business’ tax return.
Architectural Barrier Removal Tax Deduction
The Architectural Barrier Removal Tax Deduction is available to businesses of any size who incur expenses related to removing architectural and transportation barriers to assist people with disabilities and/or the elderly.
Any size business can take a deduction up to $15,000 in any year they have qualified expenses. And, if you meet the criteria for both, you can take this deduction in addition to the Disabled Access Credit (bonus!). If you do qualify for both, the deduction will make up the difference between the total amount of expenses and the amount claimed with the credit.
To claim the Architectural Barrier Removal Tax Deduction, list it as a separate expense on your business’ tax return.
Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) applies to businesses who employ qualified people in certain “targeted groups” who have consistently faced significant barriers to employment. The targeted groups related to ADA compliance are:
- Vocational Rehabilitation Referral
- Supplemental Security Income (SSI) Recipient
- Recently discharged or released veteran with a service-related disability
The WOTC is typically equal to 40% of up to $6,000 in wages for first-year employees who are certified as being in one of the IRS’ targeted groups and who worked at least 400 hours at the business claiming the credit. For employees who worked between 120 and 400 hours, the rate of the credit is generally 25% of up to $6,000.
In order to claim this credit, Form 8850, the Pre-Screening Notice and Certification Request for the Work Opportunity Credit, must be completed when the employee is hired. Then, your business has 28 calendar days after the employee’s start date to submit that form to your state’s “designated local agency” in order to have the employee certified as being a member of one of the target groups. Finally, you’ll complete and file Form 5884 and Form 3800 with your business’ tax return.
Are there tax benefits available to people with disabilities?
Yes, if you are a person with a disability or the parent or guardian of a person with a disability, there are many different tax benefits available to you.
Through tax returns and deductions, the IRS incentivizes compliance with the ADA. As with any credit or deduction your business claims, you’ll want to make sure you’ve kept accurate records and receipts to show that you qualify for these incentives.
To ensure you’re not missing out on any other tax credits or deductions, work with a Certified Public Accountant who can help you find even more ways to reduce your tax bill. In the meantime, look through my complete guide to small business tax deductions to see what else might apply to your small business.
