Tax Benefits for Businesses That Accommodate People with Disabilities

Businesses that make structural adaptations or other accommodations for the elderly or for employees or customers with disabilities may be eligible to save money on their taxes through various tax credits and tax deductions. These tax incentives include the Disabled Access Credit (a tax credit) and the Architectural Barrier Removal tax deduction (a tax deduction).

Disabled Access Credit

The Disabled Access Credit is part of the general business credit and is designed to help businesses comply with the Americans with Disabilities Act (ADA). It is available to eligible small businesses. The tax credit is equal to 50 percent of the "eligible access expenditures" that exceed $250 but do not exceed $10,250 for a taxable year. The maximum credit allowed is $5,000.

An eligible small business is one whose gross receipts did not exceed $1,000,000 for the preceding taxable year or who employed no more than 30 full-time employees during the preceding year.

Eligible access expenditures must be reasonable and necessary and meet standards issued by the Secretary of the Treasury. These expenditures include:

1. Removing barriers that prevent a business from being accessible to or usable by individuals with disabilities (widening doorways or installing ramps).  Please note that this credit does not apply to expenses incurred in connection with facilities first placed in service after November 5, 1990.
2. Providing qualified interpreters or other effective methods of making audio materials available to individuals with hearing impairments.
3. Providing qualified readers, taped texts, and other methods of making visual materials available to individuals with visual impairments (large-print, audio, and Braille).
4. Acquiring or modifying equipment or devices for individuals with disabilities.

Eligible small businesses can claim the Disabled Access credit by filing IRS Form 8826.

Architectural Barrier Removal Deduction

Businesses of all sizes that remove access barriers in their facilities or vehicles can take a tax deduction under the barrier removal deduction. The cost of improving a business asset is normally capitalized and depreciated over time. However, businesses can elect to deduct the costs of making a facility or public transportation vehicle more accessible to and usable by those who are disabled or elderly. To take the deduction, the business must own or lease the facility or vehicle and use it in connection with its trade or business.

A facility is defined as all or any part of buildings, structures, equipment, roads, walks, parking lots, or similar real or personal property. Some of the architectural barrier removal costs that can be deducted include (not an exhaustive list):

• Installing ramps
• Making curb cuts in sidewalks and entrances.
• Providing designated accessible parking spaces.
• Widening doors or installing offset hinges to widen doorways.
• Installing grab bars in toilet stalls.
• Installing an accessible paper cup dispenser at an existing inaccessible water fountain.
• Removing high pile, low density carpeting.

Businesses can deduct the costs as current expenses only if the barrier removal meets the guidelines and requirements set forth by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act of 1990.

Costs paid or incurred to completely renovate or build a facility or public transportation vehicle or to replace depreciable property are not deductible under this provision.

Up to $15,000 of costs to remove barriers to the disabled and elderly can be deducted each year. Costs incurred over this amount can, of course, be capitalized and depreciated.  Business owners can elect to deduct qualifying barrier removal costs by claiming the deductions on the business tax return. The deduction should be shown as a separate expense item on the tax return, clearly designated as barrier removal costs. Businesses should keep adequate records to support the deductions.

If you are interested in taking this tax credit or expense deduction for your business, contact one of our tax professionals for additional information and assistance.