The U.S. Equal Employment Opportunity Commission
Facts About Disability-Related Tax Provisions
The Internal Revenue Code has three disability-related
provisions of particular interest to businesses as well as people
with disabilities.
DISABLED ACCESS TAX CREDIT
(Title 26, Internal Revenue Code, Section 44)
This new tax credit is available to "eligible small businesses"
in the amount of 50 percent of "eligible access expenditures" that
exceed $250 but do not exceed $10,250 for a taxable year. A
business may take the credit each year that it makes an eligible
access expenditure.
Eligible small businesses are those businesses
with either:
- $1 million or less in gross receipts for the preceding tax
year; or
- 30 or fewer full-time employees during the preceding tax
year.
Eligible access expenditures are amounts paid
or incurred by an eligible small business for the purpose of
enabling the business to comply with the applicable requirements of
the Americans with Disabilities Act (ADA). These include amounts
paid or incurred to:
- remove architectural, communication, physical, or
transportation barriers that prevent a business from being
accessible to, or usable by, individuals with disabilities;
- provide qualified readers, taped texts, and other effective
methods of making materials accessible to people with visual
impairments;
- provide qualified interpreters or other effective methods of
making orally delivered materials available to individuals with
hearing impairments;
- acquire or modify equipment or devices for individuals with
disabilities; or
- provide other similar services, modifications, materials or
equipment.
Expenditures that are not necessary to accomplish the above
purposes are not eligible. Expenses in connection with new
construction are not eligible. "Disability" has the same meaning as
it does in the ADA. To be eligible for the tax credit, barrier
removals or the provision of services, modifications, materials or
equipment must meet technical standards of the ADA Accessibility
Guidelines where applicable. These standards are incorporated in
Department of Justice regulations implementing Title III of the ADA
(28 CFR Part 36; 56 CFR 35544, July 26, 1991).
Example: Company A purchases equipment to meet
its reasonable accommodation obligation under the ADA for $8,000.
The amount by which $8,000 exceeds $250 is $7,750. Fifty percent of
$7,750 is $3,875. Company A may take a tax credit in the amount of
$3,875 on its next tax return.
Example: Company B removes a physical barrier
in accordance with its reasonable accommodation obligation under
the ADA. The barrier removal meets the ADA Accessibility
Guidelines. The company spends $12,000 on this modification. The
amount by which $12,000 exceeds $250 but not $10,250 is $10,000.
Fifty percent of $10,000 is $5,000. Company B is eligible for a
$5,000 tax credit on its next tax return.
TAX DEDUCTION TO REMOVE ARCHITECTURAL AND
TRANSPORTATION BARRIERS TO PEOPLE WITH DISABILITIES AND ELDERLY
INDIVIDUALS
(Title 26, Internal Revenue Code, section 190)
The IRS allows a deduction up to $15,000 per year for "qualified
architectural and transportation barrier removal expenses."
Expenditures to make a facility or public transportation vehicle
owned or leased in connection with a trade or business more
accessible to, and usable by, individuals who are handicapped or
elderly are eligible for the deduction. The definition of a
"handicapped individual" is similar to the ADA definition of an
"individual with a disability." To be eligible for this deduction,
modifications must meet the requirements of standards established
by IRS regulations implementing section 190.
TARGETED JOBS TAX CREDIT
(Title 26, Internal Revenue Code, section 51)
Employers are eligible to receive a tax credit up to 40 percent
of the first $6,000 of first-year wages of a new employee with a
disability who is referred by state or local vocational
rehabilitation agencies, a State Commission on the Blind, or the
U.S. Department of Veterans Affairs, and certified by a State
Employment Service. There is no credit after the first year of
employment. For an employer to qualify for the credit, a worker
must have been employed for at least 90 days or have completed at
least 120 hours of work for the employer. The previous TJTC program
authorization, the result of a six-month extension under the Tax
Extension Act of 1991 (Pub.L. 102-227), expired on June 30, 1992.
The program has been reauthorized for an additional thirty (30)
months by the Omnibus Budget Reconciliation Act of 1993 (Pub.L.
103-06, August 10, 1993, retroactive to July 1, 1992). The
reauthorization is effective for employees who begin work for the
employer after June 30, 1992.
IRS Publication No. 907, providing information on these
provisions, may be obtained by calling 1-800-829-3676. For further
information, contact the Internal Revenue Service, Office of the
Chief Counsel, P.O. Box 7604, Ben Franklin Station, Washington, DC
20044, (202) 566-3292 (voice only).
January 1994
EEOC-FS/E-6
This page was last modified on January 15, 1997.
The above article was reprinted from the Equal Employment Opportunity Commission.
Check the EEOC website for any changes to the article.
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