5000 Reasons to Consider ADA Compliance: The Disabled Access Tax Credit - NP GROUP

How to audit and remediate your website to claim the IRS Disabled Access Credit.

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5000 Reasons to Consider ADA Compliance: The Disabled Access Tax Credit

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  3. Blog5000 Reasons to Consider ADA Compliance: The Disabled Access Tax Credit2021-01-085000 Reasons to Consider ADA Compliance: The Disabled Access Tax CreditAccessibility
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5000 Reasons to Consider ADA Compliance: The Disabled Access Tax Credit
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In the past, we have addressed many of the important reasons to take website accessibility seriously. There are compelling moral reasons to make sure that all users have equal access to your site's information and functionality, as well as a business case for accommodating what can be a significant portion of your market. Of course, most companies considering ADA accessibility audits or remediation are attempting to reduce their risk of lawsuits. In our experience, many companies (especially smaller ones) find it difficult to budget for this critical component of any web strategy.

Of course, the most cost-effective way to incorporate accessibility into your website is to make sure that the site is built to be accessible in the first place. But when that doesn't happen, we strongly recommend budgeting for an audit and remediation process. (Sometimes, even when a site is built with accessibility in mind, there are issues introduced as content is added and the site code is tweaked.) We want to share some information about a federal tax credit that you can use to offset the cost of accessibility services significantly.

The Disabled Access Credit

The Americans with Disabilities Act is well known for requiring that businesses and other public accommodations (at least those newly built since the law took effect in 1990) must take steps to ensure that their premises are equally accessible to people with disabilities. Many organizations have only recently learned that the Department of Justice and federal courts have also understood the ADA as requiring websites and mobile apps to be accessible as well. The good news is that tax incentives meant to subsidize accessibility initiatives can also be applied to digital accessibility efforts.

You can read more about the detailed rules from IRS Form 8826, but the basic gist is as follows. The IRS will allow small businesses to claim a credit of up to $5,000 each year to offset 50% of your accessibility-related expenses. This includes (but is not necessarily limited to):

  • Captioning videos
  • Producing transcripts of recorded audio
  • Providing sign language interpretation for audio materials (including videos that contain spoken text)
  • Conversion of PDFs (or any other text) materials to accessible formats
  • Removal of barriers (including digital ones) that prevent your business from being accessible
  • Consulting services to accomplish any of the above.

Who is Eligible?

Defining small businesses can often be tricky. In particular, no one wants to act, only to find out later that their company does not technically meet the IRS definition. Luckily, the official conditions for determining eligibility to claim the Disabled Access Credit are quite simple. If either of these two conditions applies to your business, then you are eligible to claim the credit:

  • Annual revenues of less than $1 million
  • Fewer than 30 full-time employees (defined as employees working 30 hours per week for at least 20 weeks out of the year)

Obviously, this doesn't apply to the Dominos or Walmarts of the world, but many of the companies we work with would meet at least one of those conditions. As always, we recommend that you consult with qualified tax professionals to confirm your eligibility.

How Does It Work?

As we mentioned before, the IRS allows you to claim a 50% tax credit against your accessibility spending. Let's share an example with some round numbers to illustrate how this works. Let's say you hire an agency to audit and remediate your site, for which you are charged $12,000. (This shouldn't be interpreted as an accurate pricing quote for your site, but we are using this number to illustrate the maximum benefits that you would be allowed to claim.)

  • The credit does not kick in until after you have spent $250 at minimum. So that means the credit should be calculated against $11,750.
  • From there, 50% of your spending would be $5,875.
  • However, the maximum credit you can claim is $5,000.

If you spend less than $10,250, your total tax credit will be less than $5,000. Above that amount, your tax credit will never exceed $5,000. Of course, you may be able to spread your costs over two tax years to claim a higher amount. Please consult your accountant or tax advisor to review any tax strategy.

What's the catch?

There isn't one, really. If accessibility work is part of your plans and budgeting already, this is free money. As long as your company meets the headcount (less than 30 employees) or revenue (less than $1 million) requirements, you should be good!

It is important to note that double dipping is not allowed. If you claim another deduction or credit for any of these accessibility-related expenses, you are not allowed to claim that same expense under the Disabled Access Credit. And of course, we feel compelled once more to remind you once more that we are neither lawyers nor accountants, so you should always review your tax strategy with qualified professionals who are familiar with your situation.

Grab Your Discount

As we start the new tax year this month, if you haven't yet considered incorporating accessibility remediation into your plans for 2021, please be in touch to learn more about how we can help you. With the help of the credit, what may have previously seemed unaffordable may make a lot more sense for you now. And, it's the right thing to do.

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