Tax Incentives

Tax Incentives

Federal tax incentives are available to encourage businesses to comply with the Americans with Disabilities Act (ADA). These incentives support businesses as they remove architectural barriers and accommodate employees and/or customers with disabilities. Many states also offer similar tax incentives.

Unfortunately, many business owners and employers are unaware that these incentives exist. Make sure your business takes advantage of these valuable incentives!

Architectural/Transportation Tax Deduction

Key Facts

• All businesses are eligible for this deduction.
• Businesses may be able to take an annual deduction for expenses related to removing physical, structural, and transportation barriers for people with disabilities.
• Included are expenditures for:
  • Providing accessible parking spaces, ramps, and curb cuts;
    Providing telephones, water fountains, and restrooms that are accessible to persons in wheelchairs;
  • Making walkways at least 48 inches wide.
  • Maximum deduction of $15,000 per year
• Barrier removal activities must comply with applicable accessibility standards; for specific standards see the ADA Standards for
• Small businesses cannot claim a tax credit and deduction for the same dollar spent; however, they can use the incentives in combination, provided that the expenditures incurred qualify under both.
• Deduction can be used annually, but expenses may not be carried over from one year to the next.
• To claim this deduction, businesses should follow the instructions for Barrier Removal Costs in IRS Publication 535.

Disabled Access Credit

Key Facts

• Small businesses are eligible.
• This is a nonrefundable tax credit for an eligible small business that pays or incurs expenses to provide access to persons with disabilities.
• The expenses must be to enable the eligible small business to comply with the ADA.
• Included are expenditures for:
• Removing architectural, communication, physical or transportation barriers that prevent a business from being accessible to, or usable 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; and
• Providing other similar services, modifications, materials, or equipment.
• The amount of tax credit is equal to 50% of the eligible expenditures in a year, more than $250 and up to a maximum expenditure of $10,250; there is no credit for the first $250 of expenditures, therefore, the maximum tax credit is $5,000.
• New construction expenditures are NOT eligible.
• Can be used annually, but expenses may not be carried over from one year to the next.
• Use the Disabled Access Credit Form 8826 to claim tax credit.

Work Opportunity Tax Credit (WOTC) Program

Key Facts

• Small businesses are eligible.
• This program provides businesses with an incentive to hire individuals from targeted groups that have a particularly high unemployment rate or other special employment needs.
• Tax credit of up to 40% of the first $6,000, or up to $2,400, in wages paid during the first 12 months for each new hire.
• Eligible employees must work 180 days or 400 hours; summer youth must work 20 days or 120 hours; a partial credit of 25% for certified employees, who worked at least 120 hours, but less than 400 hours, may be claimed by the employer.
• Must complete and submit IRS Form 8850, “Pre-Screening Notices and Certification Request for the Work Opportunity and Welfare-to-Work Credits,” to your local State Employment Security Agency (SESA).
• On January 3, 2012, the President signed into law the American Tax Payer Relief Act of 2012, which authorizes an extension of the WOTC program. The Act:
• Continues authorization of all veteran target groups (including those implemented under the VOW to Hire Heroes Act) until December 31, 2013.
• Retroactively reauthorizes all WOTC non-veteran target groups, from December 31, 2011 to December 31, 2013.
• Retroactively reauthorizes Empowerment Zones, which determines eligibility for the summer youth target group, from December 31, 2011 to December 31, 2013.
• Does not reauthorize the Recovery Act disconnected youth and Recovery Act unemployed veteran target groups.
• For more information and details on the WOTC, see the WOTC Fact Sheet.