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The phrases “tax season” and “good news” don’t always naturally go together. However, there is good news for small businesses willing to invest in digital accessibility for people with disabilities: the ADA tax credit. If you are part of a small business that’s already made this investment, you can recoup some of the costs. If you’ve yet to implement web accessibility, these tax incentives may convince your decision-makers to commit to an ADA compliant website.
The ADA Compliance Tax Credit Explained (Including Eligibility)
Small businesses with gross receipts of one million dollars and less or those that employ 30 or fewer employees are eligible for the ADA tax credit. Use IRS Form 8826 for these tax benefits (the Disabled Access Credit), and reference Title 26, Internal Revenue Code, Section 44. Tax credits differ from tax deductions—a deduction reduces taxable income and, therefore, the tax owed. Conversely, a tax credit gets subtracted from the tax owed later in the process. For example, you can take a 50% credit up to $10,250 for expenditures over $250, resulting in a $5,000 maximum credit.
See the terms for claiming the Disabled Access Credit below:
- Example 1: Your company spends $5,000 on an accessibility audit or enhancing your website’s accessibility. Only expenditures over $250 qualify, so subtract $250 from $5,000 to get $4,750. You can claim 50% of that amount as a tax credit. In other words, you can subtract $2,375 from the amount owed on your next tax return.
- Example 2: Your company spends $12,000 on an accessibility audit or enhancing your website’s accessibility. You exceed the $10,250 limit, $10,000 of which you can claim. The 50% tax credit, then, comes out to $5,000.
What is Accessibility?
Small businesses incur certain costs when they install a wheelchair ramp, provide a sign language interpreter for an event, or offer print materials in Braille. Tax benefits for accessibility help them with these costs. But the tax benefits also extend to websites, which can be hugely important for people with disabilities. So creating a barrier-free internet is critical, and giving businesses an incentive to make digital accessibility a priority is a welcomed initiative.
The truth is most websites are not highly accessible. They contain obstacles for users with various disabilities. Enhancing a website’s accessibility also involves costs, particularly when retrofitting an existing website instead of building a new one with accessibility in mind. The same tax benefits that apply to accommodations like wheelchair ramps also apply to websites and can help site creators with the associated costs.
Why Accessibility Matters Beyond the Tax Incentives
ADA tax credits are undoubtedly advantageous for businesses, especially smaller organizations with fewer resources. But web accessibility goes well beyond tax deductions and tax incentives. An accessible website can provide a legal safety net, elevate online retail performance and provide inclusivity for people with disabilities.
And accessibility has never been more urgent as federal courts increase related lawsuits against non-compliant companies. Moreover, your company is vulnerable no matter how small you may think it is. Not just the Fortune 500 players face punitive action, and smaller businesses are even less prepared to absorb related costs.
On the positive side, an accessible website empowers you to welcome the 61 million American adults who have disabilities, which represents an $8 trillion global market.1
Additional Tips for Tax Benefits
In addition to the ADA tax credit, other tax breaks can slash costs. See the examples below.
ADA Tax Deduction
This applies to organizations that completed ADA requirements, with a $15,000 annual deduction maximum. So, your company could qualify for the tax deductions even if you don’t qualify for the ADA tax credit. Refer to IRS Publication 535 for all related details.
Combined ADA Tax Incentives
Small businesses can be eligible for the ADA tax credit and ADA tax deduction—when ADA compliance costs are over $10,250.
The Architectural Barrier Tax Deduction
Businesses can claim a $15,000 maximum annual deduction for qualified expenses. In addition, businesses can combine the Disabled Tax Credit and the architectural/transportation tax deduction in the same year if the costs satisfy respective guidelines.
Count on UserWay for Your Accessibility Needs
Unfortunately, most websites aren’t accessible in today’s world, and people with disabilities are the ones who suffer. But UserWay’s AI-Powered Accessibility Solution can help you improve accessibility and compliance affordably. Of course, small businesses can always use a break financially, especially if you’re at the beginning of the web development process. Regardless of where you are in your journey, the ADA tax credit can provide some much-needed help.
See the IRS Tax Credits and Deductions page for more details.
How Does the ADA Tax Credit Apply To Web Accessibility?
The ADA tax directly impacts businesses that develop accessible websites. Qualifying expenditures cover numerous accessibility practices or integration categories. In addition, here are some key variables to consider in your annual accessibility fee:
- Homepage modifications
- Page format and hierarchy
- Live chat services
- All related content
- File and media fixes
What Are the Conditions of the ADA Tax Credit?
The ADA tax credit can be applied for and earned annually. However, you can’t carry expenditures over to claim a credit exceeding the prior year’s expenditure limit. But, if the credit amount you’re entitled to exceeds the taxes owed, you can roll the unused portion into the following year.
The tax credit covers the following accessibility and ADA-related expenditures:
- Web accessibility & optimization
- Language interpreters
- Adaptive equipment
- Printed materials
- Elimination of physical obstacles
- General consulting
Is the ADA Tax Credit a One-Time Deal?
Fortunately, you can get this credit any year your website meets ADA compliance requirements. However, you can’t use the ADA tax credit with other credits in your tax returns. But this tax break should be incentive enough to update your site for ADA conformance regularly.
Please note that UserWay is not responsible for any tax information that changes or is misinterpreted. This post is meant to be informative and does not replace the advice of an accountant or tax professional.