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tax credits

federal - small business tax credits

The "Disabled Access Tax Credit" (Title 26, Internal Revenue Code, Section 44), is a tax credit for access expenditures that are incurred in order to comply with the ADA. This enables an eligible small business to elect a non-refundable tax credit equal to half of the expenditures for eligible accommodations that are above $250.00. The maximum credit a business can elect for any tax year is $5,000 for eligible expenditures of $10,250 or more.

Eligible small businesses: Are defined as any person (the term includes corporations) whoe gross receipts for the preceding tax year did not exceed $1 million, or whose full-time employees number is fewer than 30. An employee is considered full-time if he or she works at least 30 hours a week for 20 or more calender weeks in the tax year.

Eligible access expenditures: Specifically include amounts paid or incurred to acquire equipment or devices for people with disabilities.

*What expenses are covered?
The credit is available every year andmay be used for a variety of costs such as:

  • Sign language interpreters for employees and/or customers who have hearing impairments;
  • Readers for employees and/or customers who have visual impairments;
  • Purchase of adaptive equipment or the modification of equipment;
  • Production of print materials in alternate formats (e.g., Braille, CD, audio tape, large print);
  • Removal of barriers, in buildings and transportation, that prevents a business from being accessible to, or usable by, people with disabilities.

Accessible Medical Equipment:

  • Opthalmic wheelchair access slide equipment
  • Accessible examination tables.

At the present time, there is an unresolved difference regarding the availability of a Federal 44 Credit for purchases of medical equipment.

"Most importantly for the purpose of the practitioner, Code Section 44 requires that eligible access expenditures must be reasonable and necessary to comply with the ADA requirements." Therefore, assuming the purpose of a purchase is a to acquire or modify equipment or devices for people with disabilities, the purchase must be reasonably necessary to accomplish that goal.

A two-part test can be utilized to determine whether an expense is an eligible access expenditure, and thus subject to the credit.

  1. The expenditure must be for the primary purpose of complying with the ADA requirements.
  2. The expenditure must be reasonably necessary to accomplish that purpose.

The Section 44 tax credit can be elected in more than one tax year. No other deduction or credit is allowed under any other IRS Code provision (Section 190 [See Below] of the IRS Code e.g. architectural and transportation barrier removal expenses) for the amount of the access credit. This credit is taken in lieu of any deduction credit otherwise allowable for the same costs. Expenses in connection with new construction with new construction are not eligible.

To be eligible for the tax credit, barrier removals or the provision of services, modifications, materials, or equipment must meet technical standards of the ADA Accessibility Guidelines. These standards are incorporated in Department of Justice regulations implementing Title III of the ADA (28 CFR part 36; 56 CFR 35544, July 26, 1991).

Example: Company A purchases equipment to meet its reasonable accommodation obligation under the ADA amount by which $8,000 exceeds $250 is $7,750. Fifty percent of $7,750 is $3,875. Company A may take a tax amount of $3,875 on its next tax return.

Example: Company B removes a physical barrier in accordance with its reasonable accomodation obligation. The barrier removal meets the ADA Accessibility Guidelines. The company spends $12,000 on this modification which $12,000 exceeds $250 but not $10,250 is $10,000. Fifty percent is $10,000 is $5,000. Company B is eligible for tax credit onits next tax return.

How can this credit be claimed?
Businesses can claim the Disabled Access Credit on IRS Form 8826

*Please Note: Check with your tax advisor to determine the availability of federal credit and individual deductions in your state while re-lying on a manufacturer's statement regarding a particular piece of equipment that is "ADA approved".