ADA Tax Credit: How to Apply, Who Qualifies, and Key Stipulations
Every day sees a rising number of businesses making the commendable choice to incorporate a wide range of web accessibility strategies into their digital operations. They employ a mix of native accessibility methods, automated tools, and various accessibility services to ensure their websites are accessible to all, while also achieving compliance with the Americans with Disabilities Act (ADA). Despite the availability of affordable solutions for businesses of all sizes, the accumulated cost of incorporating accessibility measures, both online and offline, can surprisingly pile up over the course of a year.
Recognising this, the U.S. government has decided to encourage and support these accessibility practices that adhere to the ADA. They do this by offering a tax credit, which essentially is an amount deducted from your total tax liability after your taxes are calculated. This incentive is intended to ease the financial burden of businesses that are consistently committed to maintaining accessible practices.
What is the ADA Tax Credit?
The tax credit, listed under Section 44 of the IRS Code, covers 50% of the eligible access expenditures made during the previous tax year, with a maximum expenditure limit of $10,250. There is no credit for the first $250 of the expenditures, and so, it is subtracted accordingly. Therefore, the highest amount of credit a business can receive is $5,000.
For example, let’s say a business spends $490 on accessWidget (and that’s its annual accessibility fee). We would subtract $250 from that, which leaves $240. The business is then receiving 50% of what’s left, which equals $120 in credit. This means that a business would only be paying $370 a year for the XFlow Studio solutions..
Are you eligible for the ADA Tax Credit?
The ADA tax credit benefit is available to businesses that generated $1,000,000 or less during the year prior to filing or businesses that employ 30 or fewer full-time employees.
Where do accessible websites stand with the ADA Tax Credit?
The ADA was initially drawn up with the intention of applying its rules and regulations to the evolving internet landscape. Currently, the ADA covers websites and does in fact mandate accessibility in the digital arena; this means that the tax credit very much applies to businesses who invest in owning and operating accessible sites.
Many accessibility practices or types of implementation are included in the list of qualifying expenditures, but there is also a variety of accessibility elements to look at when calculating your annual accessibility fee. These include homepage adjustments, page structure and hierarchy, live chat support that makes a site more accessible, and messaging (copy and content). Paid-for services such as file and media remediation also qualify as an expenditure.
What stipulations do you need to be aware of?
The great news is that the ADA tax credit can be applied for and earned on an annual basis! Although, expenditures may not be carried over from the previous year to claim a credit that exceeded the expenditure limit from the year before. But, if the credit amount you’re entitled to exceeds the amount of taxes that you owe, you are allowed to roll the unused portion of the credit forward into the next year.
The tax credit covers the following accessibility and ADA-related expenditures:
- web accessibility solutions or tools that optimise websites
- the hiring of sign language interpreters
- the purchase of adaptive equipment
- the production of accessible formatting on printed materials (braille, large print, audiotape, computer diskette)
- the removal of architectural barriers in facilities or vehicles
- fees for consulting services
How to apply
Let’s dive into the application process so you can ensure that you dot your i’s and cross your t’s. First things first, please refer to the Tax Incentives for Improving Accessibility Fact Sheet which provides facts on the tax credit.
Once you have confirmed that your business is eligible, fill out Form 8826 to apply. It must then be attached to your yearly tax return and sent alongside it. You’re able to find Form 8826 on the IRS government website, where you can also research the rules and stipulations regarding the tax credit itself. More instructions can also be found on page 2 of Form 8826. You can also read more on the IRS Tax Credits and Deductions page on the Americans with Disabilities Act website.
Before you sign off and send in your comprehensive return files, don’t forget to consult with a CPA or tax professional. If a CPA firm doesn’t know this credit exists, make sure to tell them the form number (8826). They can easily fill out the form and state the accurate amount spent on accessibility efforts, speeding up the process and ensuring it’s done right!