With tax season well underway, a reader asked me to explain tax credits for hiring people with disabilities. The federal government provides credits and deductions to help raise employment rates for Americans with disabilities, and the amount you can receive each year depends on the size of your business and the number of hires you make annually.
Disabled Access Credit
Only small businesses are eligible for the Disabled Access Credit. This is an annual tax credit for making your business accessible to persons with disabilities. For small businesses that in the previous year earned a maximum of $1 million in revenue or had 30 or fewer full-time employees, the credit is 50 percent of expenditures over $250, not to exceed $10,250, for a maximum benefit of $5,000. Businesses can claim the Disabled Access Credit on IRS Form 8826. The credit amount is subtracted from the total tax liability.
The Disabled Access Credit is available every year and can be used for a variety of costs such as sign language interpreters for employees or customers who have hearing impairments; readers for employees or customers who have visual impairments; the purchase of adaptive equipment or the modification of equipment; the production of print materials in accessible formats (e.g., braille, audio tape, large print); the removal of barriers, in buildings or vehicles, which prevent a business from being accessible to, or usable by, individuals with disabilities; and fees for consulting services (under certain circumstances.)
Barrier Removal Tax Deduction
Additionally, all businesses are eligible for a tax deduction of $15,000 per year for the removal of architectural or transportation barriers to comply with applicable accessibility standards. Small businesses can use these incentives in combination with the Disabled Access Credit 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.
For more information please see the Americans with Disabilities fact sheet.
Work Opportunity Tax Credit
The third tax benefit available to all businesses is the Work Opportunity Tax Credit. When an employer fills a vacant position with a WOTC-certified employee, the employer can become qualified to claim a federal income tax credit for a portion of the new employee’s salary. Individuals eligible for certification include job seekers with disabilities who are using vocational rehabilitation services – which is how people using the Think Beyond the Label campaign are likely to find candidates, by working with their state agency.
The tax credit applies to the first $6,000 in wages paid to each new hire for the first year of employment, with a maximum tax credit of up to $2,400 per new hire. For a hire of a disabled veteran, those figures are doubled. Partial tax credits are also available. Businesses must complete and submit IRS Form 8850 and submit the Department of Labor’s Employment and Training Administration (ETA) Form 906.
You can print out quick facts about tax credits here. And now that you’re well versed in how to take advantage of tax credits and deductions in this competitive market, start your search and find qualified candidates with disabilities today. Don’t forget to share your success story with us, too!