Tax Tip 2023-66: Tax benefits to help offset the cost of making businesses accessible to people with disabilities

IRS Tax Tips

May 11, 2023

Issue Number: Tax Tip 2023-66

Tax benefits to help offset the cost of making businesses accessible to people with disabilities

When employers hire people with disabilities or make their business accessible to employees and customers with disabilities, they may be eligible for certain tax benefits. These tax benefits encourage employers to hire qualified people with disabilities and off-set some of the costs of providing accommodations.

Disabled Access Credit
The Disabled Access Credit is a non-refundable credit for small businesses that have expenses for providing access to people with disabilities. An eligible small business is one that earned $1 million or less or had no more than 30 full-time employees in the previous year. Small businesses claim the 50% credit for eligible access expenditures by filing Form 8826, Disabled Access Credit. The business can claim the credit each year they have access expenditures. For details on access expenditures, see Form 8826.

Barrier removal tax deduction
The architectural barrier removal tax deduction encourages businesses of any size to remove architectural and transportation barriers that helps people with disabilities and the elderly get around more easily. Businesses may claim a deduction of up to $15,000 a year for qualified expenses on items that normally must be capitalized. Businesses claim this deduction by listing it as a separate expense on their income tax return. The tax return must be filed on time.

Businesses may use the Disabled Access Credit and the architectural tax deduction together in the same tax year if the expenses meet the requirements of both benefits.

Work Opportunity Tax Credit
The Work Opportunity Tax Credit is available to employers for hiring individuals who have consistently faced significant barriers to employment. This includes people with disabilities and veterans.

The maximum amount of tax credit for employees who worked 400 or more hours of service is:

$2,400 or 40% of up to $6,000 of first year wages for qualifying individuals.
$9,600 or 40% of up to $24,000 of first year wages for certain qualified veterans.

A 25% rate applies to wages for individuals who work at least 120 hours but less than 400 hours for the employer.

To claim the credit, an employer must first get certification that an individual is eligible. Employers do this by submitting IRS Form 8850, Pre-screening Notice and Certification Request for the Work Opportunity Credit, to their state workforce agency within 28 days after the eligible worker begins work. Employers should not submit this form to the IRS. They should contact their state workforce agency with questions about Form 8850.

More information:
Form 5884, Work Opportunity Credit
Form 3800, General Business Credit

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Issue Number: Tax Tip 2023-66