Two tax incentives are available to businesses to help cover the cost of making access improvements. The first is a tax credit that can be used for architectural adaptations, equipment acquisitions, and services such as sign language interpreters. The second is a tax deduction that can be used for architectural or transportation adaptations.
(NOTE: A tax credit is subtracted from your tax liability after you calculate your taxes, while a tax deduction is subtracted from your total income before taxes, to establish your taxable income.)
The tax credit, established under Section 44 of the Internal Revenue Code, was created in 1990 specifically to help small businesses cover ADA-related eligible access expenditures. A business that for the previous tax year had either revenues of $1,000,000 or less or 30 or fewer full-time workers may take advantage of this credit. The credit can be used to cover a variety of expenditures, including:
· provision of readers for customers or employees with visual disabilities
· provision of sign language interpreters
· purchase of adaptive equipment
· production of accessible formats of printed materials (i.e., Braille, large print, audio tape, computer diskette)
· removal of architectural barriers in facilities or vehicles (alterations must comply with applicable accessibility standards)
· fees for consulting services (under certain circumstances)
Note that the credit cannot be used for the costs of new construction. It can be used only for adaptations to existing facilities that are required to comply with the ADA.
The amount of the tax credit is equal to 50% of the eligible access expenditures in a year, up to a maximum expenditure of $10,250. There is no credit for the first $250 of expenditures. The maximum tax credit, therefore, is $5,000.
The tax deduction, established under Section 190 of the Internal Revenue Code, is now a maximum of $15,000 per year a reduction from the $35,000 that was available through December 31, 1990. A business (including active ownership of an apartment building) of any size may use this deduction for the removal of architectural or transportation barriers. The renovations under Section 190 must comply with applicable accessibility standards.
Small businesses can use these incentives in combination if the expenditures incurred qualify under both Section 44 and Section 190. For example, a small business that spends $20,000 for access adaptations may take a tax credit of $5000 (based on $10,250 of expenditures), and a deduction of $15,000. The deduction is equal to the difference between the total expenditures and the amount of the credit claimed.
Example: A small business’ use of both tax credit and tax deduction
$20,000 cost of access improvements (rest room, ramp, 3 doors widened)
$5,000 maximum credit
$15,000 remaining for deduction
Tax Incentives for Improving Accessibility
The tax credit and deduction can be used annually. You may not carry over expenses from one year to the next and claim a credit or deduction for the portion that exceeded the expenditure limit the previous year. However, if the amount of credit you are entitled to exceed the amount of taxes you owe, you may carry forward the unused portion of the credit to the following year.
For further details and information, review these incentives with an accountant or contact your local IRS office.
The IRS tax form needed for improving accessibility is Form 8826. This form can be printed from this website.
Source: U.S. Department of Justice, go to the website, www.ada.gov/taxpack.htm#297649