Tom Deyak, CPA •
A tax credit is typically always more beneficial than a tax deduction as a credit is a dollar for dollar reduction in income tax, where as a tax deduction is a reduction of income tax in proportion to your income tax bracket (i.e. $100 deduction in the 25% tax bracket will save you $25 in income taxes).
One business tax credit that is currently available to taxpayers is the Disabled Access Credit. This tax credit has specific requirements and often raises confusion among taxpayers in determining if they are able to qualify and take advantage of the credit. Our goal is to help explain this credit and answer some of those common questions.
A tax credit is typically always more beneficial than a tax deduction as a credit is a dollar for dollar reduction in income tax, where as a tax deduction is a reduction of income tax in proportion to your income tax bracket (i.e. $100 deduction in the 25% tax bracket will save you $25 in income taxes).
One business tax credit that is currently available to taxpayers is the Disabled Access Credit. This tax credit has specific requirements and often raises confusion among taxpayers in determining if they are able to qualify and take advantage of the credit. Our goal is to help explain this credit and answer some of those common questions.
The Disabled Access Credit allows businesses to receive a tax credit based on expenditures they incurred to make their facilities accessible to disabled individuals. In order to be eligible for the tax credit, the business must qualify as an eligible small business and have incurred eligible access expenditures. If both of these criteria are met, the tax credit is equal to 50% of the eligible access expenditures up to a maximum credit of $5,000 in one tax year. The credit can be claimed by filing Form 8826 in the applicable tax year.
In order to qualify as an eligible small business, you must have gross receipts for the prior year of $1 million or less or have employed 30 or fewer full-time employees during the year. It is important to note that a controlled group is treated as a single employer for the purpose of determining eligibility for the Disable Access Credit.
If you qualify as an eligible small business, the next step is to determine if you have eligible access expenditures. In general, eligible expenses include those expenditures that were incurred by an eligible small business to comply with the requirements under the Americans with Disabilities Act of 1990. These include the following:
In many cases, a small business incurs these expenditures indirectly while making improvements to their facility and are unaware that some of the expenditures are related to ADA compliance and would be eligible for the tax credit. It is essential that the taxpayer properly document these expenses and keep the appropriate backup indicating the access expenditures. As always, it is important to keep your tax advisor in the loop and reach out to him or her with questions on eligibility.
In order to qualify as an eligible small business, you must have gross receipts for the prior year of $1 million or less or have employed 30 or fewer full-time employees during the year. It is important to note that a controlled group is treated as a single employer for the purpose of determining eligibility for the Disable Access Credit.
If you qualify as an eligible small business, the next step is to determine if you have eligible access expenditures. In general, eligible expenses include those expenditures that were incurred by an eligible small business to comply with the requirements under the Americans with Disabilities Act of 1990. These include the following:
- Removing obstructions at an existing facility that prevent access to or use by disabled individuals. These not only include physical barriers but can also be related to communication and/or transportation items.
- Expenditures incurred to provide interpretative audio materials available to those with hearing impairments.
- Expenditures incurred to provide qualified readers, taped texts, and other visual aids available to those with visual impairments.
- To obtain or modify equipment utilized by disabled individuals.
In many cases, a small business incurs these expenditures indirectly while making improvements to their facility and are unaware that some of the expenditures are related to ADA compliance and would be eligible for the tax credit. It is essential that the taxpayer properly document these expenses and keep the appropriate backup indicating the access expenditures. As always, it is important to keep your tax advisor in the loop and reach out to him or her with questions on eligibility.
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