Sometimes it is difficult to determine when an accommodation under the ADA is truly a financial hardship for a business. Businesses also need to know that a person with a disability can challenge them if they claim that providing a particular accommodation is an undue hardship. To avoid any type of legal action, a business can take advantage of federal tax credits and breaks to help them offset the cost of an accommodation. Below is an excerpt from US Department of Justice Tax Incentive Packet that explains both incentives.
The tax credit, established under Section 44 of the Internal Revenue Code, was created in 1990 specifically to help small businesses cover ADA-related eligible access expenditures. A business that for the previous tax year had either revenues of $1,000,000 or less, or 30 or fewer full-time workers may take advantage of this credit. The credit can be used to cover a variety of expenditures, including:
- provisions for readers for customers or employees with visual disabilities
- provisions for sign language interpreters
- purchases of adaptive equipment
- production of accessible formats of printed materials (i.e., Braille, large print, audio tape, computer diskette)
- removal of architectural barriers in facilities or vehicles (alterations must comply with applicable accessibility standards)
- fees for consulting services (under certain circumstances)
Note that the credit cannot be used for the costs of new construction. It can be used only for adaptations to existing facilities that are required to comply with the ADA. The amount of the tax credit is equal to 50% of the eligible access expenditures in a year, up to a maximum expenditure of $10,250. There is no credit for the first $250 of expenditures. The maximum tax credit, therefore, is $5,000.
The tax deduction established under Section 190 of the Internal Revenue Code is now a maximum of $15,000 per year, a reduction from the $35,000 that was available through December 31, 1990. A business (including active ownership of an apartment building) of any size may use this deduction for the removal of architectural or transportation barriers. The renovations under Section 190 must comply with applicable accessibility standards.
Small businesses can use these incentives in combination if the expenditures incurred qualify under both Section 44 and Section 190. For example, a small business that spends $20,000 for access adaptations may take a tax credit of $5000 (based on $10,250 of expenditures), and a deduction of $15,000. The deduction is equal to the difference between the total expenditures and the amount of the credit claimed.
Example: A small business' use of both tax credit and tax deduction
|$20,000||cost of access improvements (rest room, ramp, 3 doors widened)|
|- $5,000||maximum credit|
|$15,000||remaining for deduction|