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Tax Incentives Can Offset the Cost of ADA Compliance

July 1, 1999
Related Topics: Disabilities, Finance/Taxes, Featured Article
More than 43 million Americans withphysical or mental impairments are protected under the Americans withDisabilities Act (ADA). But did you know federal tax incentives help eligiblesmall businesses offset the cost of making accommodations and otherwisecomplying with the ADA? There are actually more tax breaks and governmentalsupport than most employers realize.

    And we’re nottalking chump change here, either.

    Although the ADAguidelines may seem overwhelming, they merely extend rights and responsibilitiesto people with disabilities. Private companies need only to remove barriers inexisting buildings and construct new facilities. This could mean something assimple as adding lights to the standard beepers on forklifts, or building anentrance ramp for wheelchair-bound employees.


Tax credit covers ADA expenses
    Several provisionsof the IRS tax code can help ease the bite of complying with the ADA when makingyour company’s facilities accessible, says Heather O’Donnell, a corporatetax attorney for the Chicago-based law firm Holleb & Coff. “The DisabledTax Credit has been around since 1990, and provides a tax credit forexpenditures incurred by businesses to make the workplace more accessible fordisabled individuals.”

    Section 44 of theIRS Code allows a tax credit for small businesses with total revenues of $1million or less the previous tax year, or 30 or fewer full-time employees. Thiscredit can cover 50 percent of the “eligible access expenditures” in a yearup to $10,250 (maximum credit is $5,000). The tax credit can be used for suchthings as architectural adaptations, equipment acquisitions, services such assign language interpreters, and for purchasing certain adaptive equipment.

    Note: The tax creditcannot be used for the costs of new construction. It can be used only foradaptations to existing facilities to comply with the ADA. The credit issubtracted from your tax liability. For example, if you owe $20,000 in federalincome tax and you received the maximum Disabled Tax Credit of $5,000, you’llonly owe $15,000, says O’Donnell.

    Section 190 of theIRS code allows a tax deduction for all businesses. This deduction can be usedfor architectural or transportation adaptations for a maximum of $15,000 peryear - a reduction from the $35,000 that was available through December 31,1990. The tax deduction can be claimed for expenses that are incurred in barrierremoval and alterations, and is subtracted from your total income before taxesto establish your taxable income. “The deduction isn’t a dollar-for-dollarcredit against your tax,” says O’Donnell.


Tax incentives can be used annually
    Eligible smallbusinesses may take both the tax credit and the tax deduction in combination ifthe expenditures incurred qualify under both Section 44 and Section 190. Forexample, a small business that spends $20,000 for access adaptations may take atax credit of $5,000 (based on $10,250 for expenditures), and a deduction of$15,000. The deduction is equal to the difference between the total expendituresand the amount of the credit claimed.

    The tax credit anddeduction can be used annually. You may not carry over expenses from one year tothe next and claim a credit or deduction for the portion that exceeded theexpenditure limit the previous year. However, if the amount of credit you areentitled to exceeds the amount of taxes you owe, you may carry forward theunused portion of the credit to the following year.

    Just be sure theseincentives are used specifically for the purpose of complying with the ADA, addsO’Donnell. And make sure your business is eligible for the credit or deductionthat you’re claiming. And always consult your accountant or tax professionalwhen claiming credits or deductions.

Workforce, July 1999, Vol.78, No. 7, p. 84  SubscribeNow!

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