The disabled access tax incentives were created in 1990 specifically to help small businesses cover "eligible access expenditures" related to the Americans with Disabilities Act.
Title I of the ADA prohibits private employers with 15 or more employees from discriminating against a qualified individual with a disability. To implement this prohibition, the ADA requires that employers provide reasonable accommodations to the known physical or mental limitations of a qualified individual with a disability, unless to do so would impose an undue hardship on the operation of an employer's business.
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 and transportation adaptations.
Disability Access Tax Credit: The tax credit, established under Section 44 of the Internal Revenue Code, is available to businesses that have either revenues of $1,000,000 or less or 30 or fewer full-time workers. The maximum amount of the credit is $5,000. 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)
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 of $5,000. There is no tax credit for the first $250 of expeditures.
Disability Access Tax Deduction: The tax deduction, established under Section 190 of the Internal Revenue Code, allows a business of any size to expense up to a maximum of $15,000 per year of items that normally must be capitalized (depreciated). This deduction may be used for expenses associated with the removal of architectural or transportation barriers in association with a trade or business that complies 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.