April 15 – tax day in the United States – don’t we all look forward to it? While there is a sense of relief about getting our tax returns done each year it’s not too soon to start thinking about preparations and considerations for next year’s tax season.
Did you know that there are two tax incentives available to businesses to help cover the cost of making access improvements related to the American with Disabilities Act (ADA)?
In the United States, ADA was signed into law on July 26, 1990. It is summarized by: “No person shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, and accommodations of any place of public accommodation.” The ADA prohibits discrimination on the basis of disability in employment, programs and services provided by state and local government, goods and services provided by private companies, and in commercial facilities.
The Act includes provisions to accommodate the hard of hearing, including incorporating Assistive Listening Systems in new building construction, in alterations or renovations to buildings and facilities of private companies providing goods or services to the public. It also requires that State and local governments provide access for the hard of hearing in programs offered to the public.
Examples of facilities that must comply with ADA Guidelines
- Convention Centers
- Retail Stores
- Shopping Centers
- Amusement Parks
- Private Schools
- Day Care Centers
- Health Spas
- Bowling Alleys
The first incentive is a tax credit that can be used for architectural adaptations, equipment acquisitions, and services such as sign language interpreters. A tax credit is subtracted from your tax liability after you calculate your taxes.
The second incentive is a tax deduction that can be used for architectural or transportation adaptations. A tax deduction is subtracted from your total income before taxes, to establish your taxable income.
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:
- provision of readers for customers or employees with visual disabilities
- provision of sign language interpreters
- purchase 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)
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 business 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.
In certain instances, the tax savings can cover a significant portion of your investment. Now there’s something to look forward to for next year!