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The phrases “tax season” and “good news” don’t always naturally go together. With tax season upon us, there is good news for small businesses who are either making efforts to increase accessibility for disabled individuals or considering such efforts: tax benefits for small businesses that spend money on accessibility.
If you are part of a small business that already has made such expenditures, you can recoup some of those costs. If you have not yet engaged in accessibility efforts, these tax benefits might be the incentive you need to get started or the key to convincing your company’s decision-makers to take steps.
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 are meant to help them with these costs. But the tax benefits also extend to websites, which can be hugely important for people with disabilities. 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. These sites contain obstacles for users who have visual impairments, are deaf, are unable to use a mouse, and more. Enhancing a website’s accessibility also involves costs, particularly when retrofitting an existing website as opposed to building a new site with accessibility in mind from the start. The same tax benefits that apply to accommodations like wheelchair ramps also apply to websites and can help site creators with the associated costs.
Tax Credit Details
To claim these tax benefits, use IRS Form 8826, the Disabled Access Credit, and refer to Title 26, Internal Revenue Code, Section 44.
Tax credits are different than tax deductions. A deduction reduces taxable income and, therefore, the tax owed. Tax credits come later in the process — after tax has been calculated, a credit is subtracted outright from tax owed.
The Disabled Access Credit is limited to small businesses with gross receipts of one million dollars or less or that employ 30 or fewer people. Of course, being tax-related, it isn’t super simple. But it’s not overly complicated, either.
These are the terms for claiming the Disabled Access Credit: For expenditures more than $250, you can take a 50% credit up to $10,250 for a maximum credit of $5,000.
Example 1: Your company spends $5,000 on an accessibility audit or enhancing your website’s accessibility.
Only expenditures in excess of $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 tax owed on your next return.
Example 2: Your company spends $12,000 on an accessibility audit or enhancing your website’s accessibility.
You have exceeded the limit of $10,250.
You can claim $10,000 of that. The 50% tax credit, then, comes out to $5,000.
Note also that the same expenditures cannot be capitalized, cannot be used in figuring a different credit, or any other example of “double-dipping.” Also note, however, that this is not a one-time credit. It can be used each year as long as eligibility requirements are met.
But wait, there’s more (possibly)
The Disabled Access Credit applies to federal taxes. There may also be additional tax benefits at the state level. You should consult a tax professional or perform additional research, depending on the state where your business is based.
In addition to the Disabled Access Credit, there is also another tax deduction for architectural enhancements. This deduction does not apply to websites but rather to physical business locations. It might be best to consult a tax professional before making these expenditures and then plan accordingly.
For more information, see:
- Fact Sheet, Tax Incentives for Improving Accessibility (PDF)
- IRS Tax Credits and Deductions page on the Americans with Disabilities Act site (Website)
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.