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Nail down tax credit for access accommodations

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in Discrimination and Harassment,Human Resources,Small Business Tax,Small Business Tax Deduction Strategies

If you own a small business that’s open to the general public, or you run an office where employees work, you’re legally obligated to make the business premises accessible to disabled individuals. But it’s possible to defray part of the expense with some smart tax planning.

Strategy: Ensure that most, if not all, renovation costs qualify for the disabled-access credit. The credit reduces your business tax bill dollar-for-dollar. If you qualify, you can literally write off up to half of your costs!

What’s more, the disabled-access credit might cover a lot more than you’d think. It’s not just limited to installing ramps and guardrails.

Here’s the whole story: A small business can claim the disabled-access credit for making business premises more accessible to disabled individuals. For this purpose, a “qualified small business” is an operation that had gross receipts of $1 million or less or one that didn’t employ more than 30 fulltime employees in the preceding tax year.

How much is the disabled-access credit? It’s equal to 50 percent of the first $10,000 of qualified expenses. (Actually, you can exclude the first $250 of expenses, so the credit applies to the first $10,250 of expenses.) In other words, the maximum credit is $5,000.

What expenses qualify for the credit? They must be incurred to meet the requirements established by the Americans with Disabilities Act (ADA). But the list is more expansive than generally thought. For instance, a small business can claim the credit for the following costs:
  • Removing architectural, communication, physical or transportation barriers that prevent a business from being accessible to, or usable by, disabled individuals.

  • Providing qualified interpreters or other effective methods of making orally delivered materials available to hearing-impaired individuals.

  • Providing qualified readers, taped texts and other effective methods of making visually delivered materials available to visually impaired individuals.

  • Acquiring or modifying equipment or devices for disabled individuals.

  • Providing other similar services, modifications, materials or equipment. (IRC Sec. 44[c])
Prime example: In a Tax Court case, an optometrist purchased an automatic refractor that allowed him to treat disabled patients. Prior to buying the refractor, the optometrist had been forced to turn away individuals who were disabled. Result: The Tax Court approved the disabled-access credit even though nondisabled patients also could use the refractor. (Hubbard, TC Memo 2003-245)

Note, however, that the outcome would have been different if the optometrist had been able to treat disabled patients prior to buying the refractor.

Tip: You can claim the disabled-access credit as part of the general business credit. Take it on Form 8826, Disabled Access Credit, available at www.irs.gov/pub/irs-pdf/f8826.pdf.

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