Tax Incentives for Businesses

Three federal tax incentives are available to help businesses comply with the ADA. The incentives support businesses as they remove architectural barriers and accommodate employees and/or customers with disabilities. Many states also offer similar tax incentives. Below you will find information about these incentives, as well as links to specific tax forms and further information.

This page contains the following information:

• Architectural/Transportation Tax Deduction: IR Code Section 190, Barrier Removal
• Disabled Access Credit: IR Code Section 44
• Work Opportunity Tax Credit: (WOTC): IR Code Section 51
• State Tax Incentives

Architectural/Transportation Tax Deduction: IR Code Section 190, Barrier Removal

Key Facts:

• All businesses are eligible for this deduction
• Deduction can be used for removing barriers in existing facilities or transportation vehicles
• Examples of allowable expenditures include widening doors, installing ramps, restriping parking lots, modifying vehicles, etc.
• Maximum deduction of $15,000 per year
• Barrier removal activities must comply with applicable accessibility standards; for specific standards see the ADA Standards for Accessible Design, or the ADA Accessibility Guidelines for Transportation Vehicles
• 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
• Deduction can be used annually, but expenses may not be carried over from one year to the next
• To claim this deduction, businesses should follow the instructions for Barrier Removal Costs in IRS Publication 535

Disabled Access Credit: IR Code Section 44

Key Facts:

• Small businesses are defined as those that have revenues of $1,000,000 or less OR 30 or fewer full-time employees during the previous year
• Can be used for removing architectural barriers in existing facilities, equipment acquisitions, and auxiliary aids and services
• Examples of eligible expenses: readers for customers or employees who are blind or have low vision, sign language interpreters for customers or employees who are deaf or hard of hearing, adaptive equipment, production of accessible formats of printed materials (e.g., Braille, large print, audio tape, computer disk), removal of architectural barriers in facilities or vehicles (must comply with applicable accessibility standards), fees for consulting services (under certain circumstances)
• The amount of tax credit is equal to 50% of the eligible expenditures in a year, over $250 and up to a maximum expenditure of $10,250; there is no credit for the first $250 of expenditures, therefore, the maximum tax credit is $5,000
• New construction expenditures are NOT eligible
• Can be used annually, but expenses may not be carried over from one year to the next
• Use IRS form 8826 to claim tax credit. To get form 8826 call 1-800-829-3676 (Voice) 1-800-829-4059 (TTY) or visit the IRS Publications Index

Work Opportunity Tax Credit (WOTC): IR Code Section 51

Key Facts:

• Provides a tax credit for employers who hire certain targeted low-income groups; these groups include certain clients referred from vocational rehabilitation programs, former AFDC recipients, long-term TANF recipients, veterans, ex-felons, food stamp recipients, summer youth employees, and SSI recipients
• Tax credit of up to 40 percent of the first $6,000, or up to $2,400, in wages paid during the first 12 months for each new hire
• The WOTC is subject to yearly Congressional renewal; it is currently available to December 31, 2011
• Eligible employees must work 180 days or 400 hours; summer youth must work 20 days or 120 hours; a partial credit of 25% for certified employees, who worked at least 120 hours, but less than 400 hours, may be claimed by the employer
• Must complete and submit IRS Form 8850, "Pre-Screening Notices and Certification Request for the Work Opportunity and Welfare-to-Work Credits," to your local State Employment Security Agency (SESA); to get IRS form 8850 call 1-800-829-3676 (Voice) 1-800-829-4059 (TTY) or visit the IRS Publications Index
• For more information and details on the WOTC, see the WOTC Fact Sheet

State-Specific Tax Incentives

Maryland: Maryland Disability Employment Tax Credit

Key Facts:

• The Maryland Disability Employment Tax Credit allows businesses that hire employees with disabilities to take a tax credit for both wages paid to these employees and also for childcare and transportation expenses paid on their behalf.
• The amount of the credit in the first year is 30% of the first $6,000 paid for a maximum allowable credit of $1,800. Childcare / transportation expenses are eligible for a credit up to $600. The amount in the second year is 20% of the first $6,000 paid for a maximum allowable credit of $1,200. Childcare / transportation expenses are eligible for a credit up to $500.
• If the credit is more than the tax liability, the unused credit may be carried forward for the next five tax years.
• A credit will be allowed only for employees hired before July 1, 2006.
• Options are available to encourage even tax exempt organizations.
• Find more information on-line about Maryland's Disability Employment Tax Credit.
• Find Maryland's tax forms on-line as well.

Contact:
Maryland State Department of Education
Division of Rehabilitation Services
2301 Argonne Drive
Baltimore, MD 21218
Phone: 410-554-9401
Toll Free Phone: 1-888-554-0334 ext. 9401
E-mail: dors@msde.state.md.us

We are currently gathering information for state employment tax incentives for the District of Columbia, Delaware, Virginia, and West Virginia.  If you are currently in need of this information please contact your state Internal Revenue Service.