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Tax Incentives for Small Businesses


Did You Know?

A small business is one that has 30 or fewer employees OR $1,000,000 or less in gross receipts from the previous year.

If a credit exceeds the amount of taxes owed, businesses may carry forward the unused portion of the credit to the next year.

Small businesses cannot claim a tax credit and deduction for the same dollar spent; however, they can use the incentives in combination provided that the expenditures incurred qualify under both. See Example C

Physical modifications must comply with the applicable accessibility standards (ADA Accessibility Guidelines).

Example A: Credit
Restaurant ABC employs 25 individuals, and its gross revenue for last year was $3,000,000. it qualifies as a small business with fewer than 30 employees last year, ABC provided Braille and large print menus (an auxiliary aid), costing a total of $1,500. ABC removed physical barriers to the restaurant's entrance and modified its transportation shuttle, totaling $8,000. Each of these expenditures qualifies under the Disabled Access Credit. To calculate ABC's tax credit, start by adding the total amount spent on accessibility ($8,000 + $1,500 = $9.500) and subtract $250 ($9,500 -$250 = $9,250). Divide this amount by two ($9,250/2 = $4,625) to find the amount redeemable as a tax credit. ABC earned a tax credit of $4,625.

Example B: Deduction
Corporation XYZ removed barriers to its building two years in a row. Although the corporation deducted $4,000 from its taxes last year, XYZ removed barriers to its building two years in a row. although the corporation deducted $4,000 from its taxes last year, XYZ spent money on an additional barrier removal project this year. this is an annual tax incentive, so XYZ is eligible for another tax deduction. SYZ removed all barriers from its bathrooms this year, which cost $8,000. XYZ is able to deduct this amount, $8,000, dollar for dollar, from the amount of money on which it pays taxes.

Example C: Credit & Deduction
Small business QRS spent $20,000 on access improvements by modifying their restrooms and front entrance. these expenditures qualify under both the ta credit and deduction, so QRS can use these incentives in combination. QRS may first take a tax credit of $5,000 (based on $10,250 of expenditures) and then deduct $15,000 (the difference between the total expenditures and the amount of the credit claimed).

Tax Comparison Chart

Tax Incentives are available to encourage compliance with the Americans with Disabilities Act (ADA). This chart includes the three Federal tax incentives and encourages you to inquire whether your stat offers similar incentives. Unfortunately, many business owners and employers are unaware that these incentives exist. Make sure your business takes advantage of these valuable incentives!

Name Code/Form Eligibility Purpose/Examples Amount
Architectural/
Transportation Tax Deduction
Code: Section 190, Barrier Removal Forms:907 & 535 All Business Removal of physical, structural, and transportation barriers Ex: widening doors, building ramps modifying vehicles. Max=$15,000
Small Business Tax Credit Code: 44,Disabled Access Credit Form: 8826 Small Business Most expenses to comply with the ADA, including barrier removal providing auxiliary aids and services, and accommodating employees. Ex: Providing sign language interpreters, creating Braille documents, building ramps. 50% between $250 & $10,250 Max=$5,000
Work Opportunity Tax Credit Form: 5884 Small Business This credit encourages employment of certain targeted groups, including SSI recipients and vocational rehabilitation referrals. Max=$2,400

For More Information

National Network of ADA Centers: Free technical assistance: (800) 949-4232 V/TTY. www.adata.org

Internal Revenue Service (IRS) Questions: (800) 829-4059 TTY. Legal Questions: (202) 622-3110 V. Publications and forms: (800) 829-3676 V; (800) 829-4059 TTY. http://www.irs.gov/formspubs/index.html

U.S. Department of Justice (DOJ) Disability Rights Section: Questions: (800) 514-0301 V; (800) 514-0383 TTY

This information is not intended to provide legal tax advice. Please consult the IRS or your tax advisor.

This information was compiled by the Mid Atlantic ADA Center