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Tax Blueprint for a Disabled Access Credit

Background: As part of the general business credit, a qualified “small business” can claim a tax credit for making its business premises more accessible to disabled individuals. For this purpose, a small business is an operation that had gross receipts of $1 million or less or did not employ more than 30 full-time employees in the preceding tax year.

The disabled access credit is equal to 50% of up to $10,000 of qualified expenses. In actuality, the first $250 of expenses is excluded, so the credit applies to expenses up to $10,250. Result: The maximum credit allowed under law is $5,000.

What sort of expenses qualify for the credit? The expenses must meet the requirements established in the Americans with Disabilities Act of 1990 (ADA). For instance, your company can claim the credit for the costs of removing barriers to physical access or communication; providing interpreters or readers for individuals with visual or hearing impairments; modifying equipment; and supplying similar materials or services.

Typically, a business that has installed ramps and elevators to make the premises easier for disabled individuals to navigate has qualified for the credit.

Update: In a recent Chief Counsel Advice, the IRS says that the accommodations for disabled individuals must be to a physical structure where the public has access in order to comply with the ADA requirements. Specifically, the credit is not available for software improvements to a company’s Web site that enable visually- or hearing-impaired individuals to better access the Web site. As a result, the IRS ended up denying the credit for subscriptions to enhanced software products over multiple years.

The physical access requirement may be problematic for the ever-increasing number of employers who do business solely on the Internet. Apparently, the credit will be limited to those businesses that provide physical premises for customers or clients to visit.

Nevertheless, this is a viable tax-saving opportunity that can be seized by many small business owners. For more details, consult your professional tax adviser.

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