Every day, we see a growing number of businesses embracing the power of web accessibility. They're integrating a rich array of accessibility practices into their digital operations, using everything from native techniques to automated tools and specialized services. These forward-thinking businesses are not only opening their digital doors to everyone but also achieving ADA compliance in the process. However, even with affordable solutions available, the costs associated with both online and offline accessibility can accumulate over time.
Recognizing this, the U.S. government has stepped in to encourage and support ADA-compliant accessibility practices. They've done this by offering a tax credit, which is an amount deducted from your total tax liability after your taxes have been calculated.
Understanding the ADA Tax Credit
The ADA tax credit, found under Section 44 of the IRS Code, covers 50% of eligible accessibility expenditures made during the previous tax year. The maximum limit for these expenditures is $10,250, and the first $250 is not eligible for the credit. This means the maximum credit a business can receive is $5,000.
For instance, if a business spends $650 on an accessibility tool, we subtract the first $250, leaving $400. The business then receives 50% of this amount as a credit, which equals $200. This means the business effectively pays only $450 a year for accessibility.
Who Can Benefit from the ADA Tax Credit?
The ADA tax credit is available to businesses that either generated $1,000,000 or less in the previous year or employ 30 or fewer full-time employees.
How Does the ADA Tax Credit Apply to Accessible Websites?
The ADA was designed with the evolving digital landscape in mind. It covers websites and mandates accessibility in the digital realm, meaning the tax credit applies to businesses investing in accessible websites.
Many accessibility practices or implementation types qualify for the credit. When calculating your annual accessibility fee, consider elements like homepage adjustments, page structure and hierarchy, live chat support, and messaging. Paid services like file and media remediation also qualify as expenditures.
What Should You Know About the ADA Tax Credit?
The good news is that the ADA tax credit can be claimed annually! However, you can't carry over expenditures from the previous year to claim a credit that exceeds the previous year's expenditure limit. If the credit amount you're entitled to is more than the taxes you owe, you can roll the unused portion into the next year.
The tax credit covers a range of accessibility and ADA-related expenditures, including:
- Web accessibility solutions or tools
- Hiring of sign language interpreters
- Purchase of adaptive equipment
- Production of accessible formatting for printed materials
- Removal of architectural barriers in facilities or vehicles
- Fees for consulting services
How to Apply for the ADA Tax Credit
Ready to apply? Start by checking out the Tax Incentives for Improving Accessibility Fact Sheet, which provides essential information on the tax credit.
Once you've confirmed your business's eligibility, fill out Form 8826 and attach it to your yearly tax return. You can find Form 8826 on the IRS government website, where you can also learn more about the rules and stipulations regarding the tax credit. Additional instructions can be found on page 2 of Form 8826. For more information, visit the IRS Tax Credits and Deductions page on the Americans with Disabilities Act website.
Before you submit your tax return, consult with a CPA or tax professional. If they're not aware of this credit, let them know about Form 8826. They can help you fill out the form and accurately report the amount spent on accessibility efforts, ensuring a smooth and correct process.
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