Federal Tax Incentives for Improving Accessibility
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.)
Tax Credit
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.
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Tax Deduction
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
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Annual Incentives
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 exceeds 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 or the national
address below.
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