Complying with the ADA can provide tax benefits.

• Author: Moore, Philip E.
• Position: Americans with Disabilities Act

In 1990, Congress passed the Americans with Disabilities Act (ADA). Since then, many improvements have been made by businesses in providing access for individuals with disabilities; however, full access has not yet been achieved. Compliance with the ADA can be costly for a business; many business owners are reluctant to make the necessary improvements, as they perceive the economic rewards to be insufficient. However, to encourage compliance with the ADA and to spur access improvements, Congress has made relief available to businesses, through the use of tax incentives provided in Secs. 44 and 190.

Sec. 44--Disabled Access Credit

To encourage small businesses open to the punic to comply with the ADA, Sec. 44 was enacted in 1990. This section makes available a nonrefundable tax credit to eligible small businesses that incur ADA-related expenses to comply with providing access to persons with disabilities. An "eligible small business" is any business or person that had no more than 30 full-time employees during the preceding tax year or gross receipts not exceeding $1 million in the preceding tax year. Eligible access expenditures include amounts paid or incurred in the current tax year, for items such as (1) the removal of barriers that prevent a business from being accessible, (2) providing assistance for visually or hearing-impaired individuals and (3) acquisition or modification of equipment or devices for individuals with disabilities.

Sec. 44 allows an eligible small business to claim a credit of 50% of the eligible access expenditures over $250, not to exceed $10,250 in any tax year; thus, the maximum Sec. 44 credit is $5,000. The credit is calculated on Form 8826, Disabled Access Credit, and is part of the general business credit. Any costs in excess of the $10,250 may qualify for the Sec. 190 deduction or can be capitalized under normal depreciation rules. However, to prevent a double benefit, no deduction or credit is allowed for any amount used under Sec. 44. In addition, the disabled access credit can be carried forward for 15 years and carried back for three years.

Sec. 190--Deduction for Removing Barriers to the Disabled and Elderly

This deduction is available to all businesses that make their facilities more accessible and usable for persons with disabilities or the elderly. Usually, the cost of improving a business asset is a capital item. However, Sec. 190 permits a taxpayer to currently deduct the costs of improvements that...