Employers who hire individuals with disabilities or enhance their business facilities for employees and customers with disabilities may qualify for specific tax incentives.
These incentives are intended to motivate employers to recruit qualified individuals with disabilities and to help mitigate some of the costs associated with necessary accommodations.
At Wave Tax, we consider these to be some of the tax benefits of employing people with disabilities, aside from inclusion and improving their quality of life. Let’s take a look at some of them below.
Disability Access Credit
The disability access credit is a nonrefundable tax credit available to small businesses that incur expenses to improve accessibility for individuals with disabilities.
A small business is defined as one that generated $1 million or less in revenue or employed no more than 30 full-time staff in the previous year.
Eligible small businesses can claim a credit of 50% for qualifying access expenses by submitting Form 8826, Disability Access Credit.
This credit can be claimed annually as long as the business incurs access-related expenses. For details on qualifying expenses, refer to Form 8826.
Barrier Removal Tax Deduction
The barrier removal tax deduction incentivizes businesses of all sizes to eliminate architectural and transportation obstacles that hinder mobility for individuals with disabilities and seniors.
Businesses can deduct up to $15,000 annually for qualified expenses that typically require capitalization. This deduction should be reported as a separate expense on the business’s tax return, which must be submitted punctually.
Besides, businesses have the option to utilize both the disability access credit and the barrier removal tax deduction in the same tax year, provided the expenses meet the criteria for both incentives.
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Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) provides financial incentives to employers who hire individuals from specific groups that have historically encountered significant employment challenges, including individuals with disabilities and veterans.
The maximum tax credit available for employees who complete 400 or more hours of service is as follows:
- $2,400, which is 40 percent of the first-year wages up to $6,000 for eligible individuals.
- $9,600, representing 40 percent of the first-year wages up to $24,000 for certain qualified veterans.
- A reduced rate of 25 percent applies to wages for individuals who work between 120 and 399 hours for the employer.
To take advantage of this credit, employers must first secure certification of an individual’s eligibility. This is done by submitting Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity Credit, to the appropriate state workforce agency within 28 days of the eligible employee’s start date.
It is important for employers to refrain from sending this form to the IRS and to reach out to their state workforce agency for any inquiries regarding Form 8850.
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