According to the Americans with Disabilities Act (ADA), businesses are required to make “places of public accommodation” fully accessible to people with disabilities – and a recent surge in lawsuits is pointing out that this includes a business’s website.
As companies scramble to ensure that their code is accessible to a myriad of disabilities and is compatible with assistive technology, they are finding that this undertaking is a substantial cost not originally factored into their budget before they became aware of the legal risk, or of the target market they were excluding. That’s where this helpful tax incentive comes in.
In the case of this IRS initiative to assist with achieving ADA compliance, the deductions are a tax credit for 50% of the allowable amount for eligible expenditures.
Who does the incentive apply to?
Because implementing sophisticated testing or remediation tools can often be cost-prohibitive to businesses with smaller budgets, the IRS is offering a tax credit and tax deduction to incentivize these businesses earning gross receipts under $1 million or having no more than 30 FTEs.
What types of upgrades are eligible for the tax credit?
The IRS lists the following accessibility improvements as eligible for the incentive:
- Removing barriers that prevent a business from being accessible to or usable by individuals with disabilities
- Providing qualified interpreters or other methods of making audio materials available to hearing-impaired individuals
- Providing qualified readers, taped texts, and other means of making visual materials available to individuals with visual impairments
- Buying or modifying equipment or devices for individuals with disabilities.
Web accessibility initiatives easily meet these criteria when they remove errors in the code that make a business’s website unperceivable or inoperable by a person with disabilities, and because it may add an alternate, better-suited way for disabled users to access a business’s goods and services.
How much tax credit can I get?
If your business and the types of improvements qualify for the tax credit, you can take a tax credit for 50% of eligible expenditures (listed above) over $250 up to $10,000 a year. In other words, your tax bill can be reduced by up to $5,000.
How do I apply?
You apply for the disability access tax credit on your business tax return, using IRS Form 8826. Use the following steps to fill out the form:
- Enter the total eligible access expenditures on line 1.
- If the amount on Line 1 is less than $250, you can raise the amount to $250.
- If the amount is more than $10,000, you are only eligible for $10,000.
- Multiply the amount ($10,000 or less) by 50% to get the tax credit amount.
- Finally, enter the amount of the credit on Form 3800, the General Business Credit form, along with all the other tax credits for which your business is applying.