Helping clients use disabled-access credit

If a business client owns an operation that’s open to the general public, or runs an office where employees work, the client is legally obligated to make the premises accessible to disabled individuals. But it’s possible to defray part of the expense with some smart tax planning.

Strategy: Ensure that most, if not all, of the client’s renovation costs qualify for the disabled-access credit. In that case, the client may literally write off half the costs. What’s more, the disabled-access credit covers more than just installing ramps and guardrails.

Here’s the whole story: A small business can claim the disabled-access credit for making business premises more accessible to disabled individuals. A “qualified small business” is an operation that had gross receipts of $1 million or less, or one that didn’t employ more than 30 full-time employees in the preceding tax year.

How much is the disabled-access credit? It’s equal to 50 percent of the first $10,000 of qualified expenses. (Actually, the first $250 of expenses is excluded, so the credit applies to the first $10,250 of expenses.) The maximum credit is $5,000.

What expenses qualify for the credit? The expenses must be incurred to meet requirements established by the Americans with Disabilities Act of 1990. A small business can claim the credit for the following costs:

Removing architectural, communication, physical or transportation barriers that prevent a business from being accessible to, or usable by, disabled individuals.

Providing qualified interpreters or other effective methods of making orally delivered materials available to hearing-impaired individuals.

Providing qualified readers, taped texts and other effective methods of making visually delivered materials available to visually impaired individuals.

Acquiring or modifying equipment or devices for disabled individuals.

Providing other similar services, modifications, materials or equipment. (IRC Sec. 44[c])

Prime example: In a Tax Court case, an optometrist purchased an automatic refractor that allowed him to treat disabled patients. Prior to buying the refractor, the optometrist had been forced to turn away individuals who were disabled. Result:The Tax Court approved the disabled access credit even though nondisabled patients also could use the refractor. (Hubbard, TC Memo 2003-245) Note, however, that the outcome would have been different if the optometrist had been able to treat disabled patients prior to buying the refractor.

Tip: Clients can claim the disabled access credit as part of the general business credit. Take it on Form 8826, Disabled Access Credit, available at www.irs.gov/pub/irs-pdf/f8826.pdf.

Reprinted with permission from The Tax Strategist www.TaxStrategist.net. For continuing advice on this and numerous other tax strategies, go to www.TaxStrategist.net. Receive 2 FREE Bonus Reports and a 40% discount on the Tax Strategist when you use Promo Code WN0013.

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