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Disabled Access Tax Credit

Title I of the Americans with Disabilities Act of 1990 (ADA) prohibits private employers with 15 or more employees from discriminating against a qualified individual with a disability. The ADA requires that employers provide reasonable accommodation 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 the employer's business.

Congress was concerned with the financial impact of this legislation on small businesses and therefore, enacted Internal Revenue Code (IRC) §44. Section 44 creates a disabled access credit in the case of an "eligible small business" equal to an amount of 50 percent of the "eligible access expenditures", for the taxable year, that exceed $250 but does not exceed $10,250. Therefore, the maximum amount of the credit is $5,000. IRC § 44 requires the eligible access expenditures be made for the purpose of enabling a small business to comply with the ADA.

An "eligible small business" is defined in §44(b) as a person with gross receipts for the preceding tax year that did not exceed $1 million or, if gross receipts were greater, employed not more than 30 full-time employees during the preceding tax year; also, such person elects this provision.

Eligible access expenditures under IRC § 44(c)(1) means amounts paid or incurred by an eligible small business for the purpose of enabling it to comply with the applicable requirements of the Americans With Disabilities Act of 1990. Eligible expenditures include:

·          Removing architectural, communication, physical, or transportation barriers which prevent a business from being accessible to or useable by individuals with disabilities,

·          Providing qualified interpreters or other effective methods of making aurally delivered materials available to individuals with hearing impairments,

·          Providing qualified readers, taped texts, and other effective methods of making visually delivered materials available to individuals with visual impairments,

·          Acquiring or modifying equipment or devices for individuals with disabilities, or

·          Providing other similar services, modifications, materials, or equipment.

These expenditures only include reasonable and necessary amounts paid or incurred to comply with the ADA. See IRC § 44(c)(3). The term eligible access expenditures does not include amounts paid for the purpose of removing architectural, communication, physical, or transportation barriers in connection with any new building (first placed in service after November 5, 1990).

Under IRC § 44(d)(7), if a disabled access credit is claimed, then no other deduction or credit can be taken for the amount of the Disabled Access Credit under any other provision of Chapter 1 of the Internal Revenue Code. In addition, no increase in the adjusted basis of any property will result from the amount of this credit.

The Disabled Access Credit and the Barrier Removal Tax Deduction can be used in combination if the expenditures qualify under Internal Revenue Code (IRC) Sections 44 and 190. In such a case, the deduction is equal to the difference between the total expenditures and the amount of the credit claimed. Both the tax credit and the deduction can be used annually. However, you may not carry over expenses from one year to the next and claim a credit or deduction for a previous year’s expense.

Additional Information

For more information about the Disabled Access Credit, see IRS Form 8826. It is available online in PDF format (requires Adobe Acrobat Reader) at:
http://www.irs.gov/pub/irs-pdf/f8826.pdf

The relevant Internal Revenue Code, 26 USC § 44, is available online at:
http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t26t28+47+1++%28%29%20%20AND%20%28%2826%29%20ADJ%20USC%29%3ACITE%20AND%20%28USC%20w%2F10%20%2844%29%29%3ACITE%20%20%20%20%20%20%20%20%20

IRS Publication 334, Tax Guide for Small Business, contains information related to use of this deduction. It is available online in PDF format (requires Adobe Acrobat Reader) at:
http://www.irs.gov/pub/irs-pdf/p334.pdf

See also:

Accessibility Tax Incentives

Barrier Removal Tax Deduction

Source

Information for this topic was drawn from the IRS website at:
http://www.irs.gov/businesses/small/article/0,,id=106480,00.html
http://www.irs.gov/businesses/small/article/0,,id=106483,00.html

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