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.
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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