Don't Mess With Taxes

Photo by Marcus Aurelius

Business success, especially in the retail sector, depends a lot on prioritizing customers and their needs. Sometimes that means making physical changes to an establishment.

Uncle Sam might be able to help.

The federal tax code has a couple of incentives for businesses that make structural adaptations or other accommodations for employees or customers with disabilities.

One tax break is the Disabled Access Credit. As a credit, it provides a dollar-for-dollar offset of tax due.

The other is a tax deduction for costs to remove mobility barriers. A deduction reduces a business’ gross income so that the taxable amount also will be smaller.

Disabled Access Credit: The Disabled Access Credit is a non-refundable credit for small businesses that have expenses for providing access to people with disabilities.

It is worth up to 50 percent of eligible access expenditures that exceed $250, up to a maximum of $10,000 for a tax year. I don’t even need my calculator to know that’s a potential $5,000 credit to offset the business’ due taxes. 

Installing a ramp for wheelchairs is a common accessibility change covered under the tax credit. Other credit examples include creating parking spaces close to the business entrance, providing headphones for those with hearing impairments, making printed material in alternate formats (e.g., large-print, audio, Braille), and rearranging the company’s layout to make it accessible to those who use special equipment.

All expenditures must be reasonable and necessary, and must meet the standards issued by the Secretary of the Treasury in concurrence with the Architectural and Transportation Barriers Compliance Board.

Note, too, that expenses incurred for new construction are not eligible.

A company qualifies to claim the Disabled Access Credit if it earned $1 million or less or had no more than 30 full-time employees in the preceding taxable year.

If that’s your company, claim the credit by completing Form 8826, Disabled Access Credit, and filing it with your federal tax return. That’s the full, brief form shown below. The instructions are on page 2.

See more tax forms and more about them at Tax Forms 2024.

Barrier removal tax deduction: The Architectural and Transportation Barrier Removal tax deduction encourages businesses to remove, as the title says, architectural and transportation barriers that are challenges to people with disabilities and the elderly.

Businesses of any size may claim a deduction of up to $15,000 a year for qualified expenses on items that normally must be capitalized. The deduction is claimed by listing the amount as a separate expense on the business’ tax return.

This includes applicable changes to buildings, associated structures, equipment, roads, walks, parking lots, or similar real or personal property. The barrier removal also must meet the guidelines and requirements issued by the Architectural and Transportation Barriers Compliance Board under the Americans with Disabilities Act (ADA) of 1990.

Some architectural barrier removal costs that can be deducted are —

• Ground and floor surfaces,
• Walks,
• Parking lots,
• Ramps,
• Entrances, including doors and doorways.
• Stairs,
• Floors,
• Bathroom facilities,
• Water fountains,
• Elevators, and
• Signage and symbols of accessibility.

Claiming both in one year: Businesses may use the Disabled Tax Credit and the architectural barrier removal tax deduction together in the same tax year if the expenses meet the requirements of both tax breaks.

To use both, the deduction is equal to the difference between the total expenses and the amount of the credit claimed. Below is an example of the math when claiming both tax benefits.

Annual claims: Again, the tax credit and deduction can be used annually by qualifying businesses.

Expenses cannot be carried from one year to the next to claim a credit or deduction for the portion that exceeded the expenditure limit the previous year.

However, the nonrefundable Disabled Tax Credit is part of the general business credit, and the amount of credit that exceeds the tax owed may be carried forward to the next tax year.

For more business tax breaks, check out IRS Publication 334, Tax Guide for Small Businesses, notably sole proprietors who file Schedule C, as well as IRS.gov’s Small Business and Self-Employed Tax Center and Tax Information for Businesses.

You also might find these items of interest:

• Being the boss tax basics
• Tax implications of business entity choices
• IRS processing 400,000 ERC claims worth $10 billion

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