The disabled access credit equals 50 percent of eligible access expenditures over $250 up to $10,250, according to Cornell Law School Legal Information Institute.
Key takeaways for disabled access credit and accommodation cost limits for a small hiring firm
- Before allocating funds for an interview or workplace accommodation, verify the specific financial limits defined by federal sources. See Interview Scorecard Example for Consistent Hiring Teams.
- To qualify, a business must have earned $1 million or less or had no more than 30 full-time employees in the previous year, according to Internal Revenue Service.
- You may claim a deduction of up to $15,000 a year for qualified expenses for items that normally must be capitalized, according to Internal Revenue Service.
- Eligible access expenditures do not include amounts described in paragraph (2)(A) that are paid or incurred in connection with any facility first placed in service after the date of the enactment of the section, according to Cornell Law School Legal Information Institute (26 U.S.C. 44).
- Of the 1,425 employers who shared cost information, 872 (61%) said the accommodation their employee needed cost nothing, according to Job Accommodation Network.
Illustrative example of the credit band
Suppose eligible access expenditures for the year are $300. The amount that exceeds $250 is $50. The credit is 50 percent of that $50, which is $25. This illustration uses round figures only and is not a filed return.
Who counts as an eligible small business under the tax code
The Internal Revenue Service notes that such businesses may take the credit each and every year they incur access expenditures. To apply this test, you must determine whether your firm meets either the revenue threshold or the employee count threshold for the prior tax year.
The definition of a "full-time employee" for the 30-employee test comes from the United States Code. For purposes of the employee count, an employee is considered full-time if such employee is employed at least 30 hours per week for 20 or more calendar weeks in the taxable year, according to Cornell Law School Legal Information Institute (26 U.S.C. 44). This specific definition is critical for firms with part-time or seasonal staff, as not every person on your payroll may count toward the 30-employee limit.
To verify your eligibility, follow these steps:
- Check your previous year's revenue. If your total earnings were $1 million or less, you meet the first part of the test.
- Count your full-time employees. If your revenue exceeded $1 million, count only those employees who worked at least 30 hours per week for 20 or more calendar weeks in the previous year.
- Compare the count to 30. If the number of full-time employees identified in step 2 is 30 or fewer, you meet the second part of the test.
Meeting either the revenue test or the employee count test makes the business eligible under the tax code.
If your firm is close to the 30-employee boundary, track hours carefully during the year to ensure accurate reporting for the following year's credit calculation. The distinction between full-time and part-time status directly impacts whether you qualify for the credit if your revenue exceeds $1 million. See Hiring laws at 15 staff, 20 staff, and age 40.
What counts as an eligible access cost and what does not
The tax code defines the specific spending that qualifies for the credit. According to Cornell Law School Legal Information Institute (26 U.S.C. 44), the term “eligible access expenditures” means amounts paid or incurred by an eligible small business for the purpose of enabling such eligible small business to comply with applicable requirements under the Americans With Disabilities Act of 1990. This definition ties the credit directly to compliance with the Americans With Disabilities Act of 1990, as it was in effect on the date of the enactment of the section. The spending must be incurred by an eligible small business. The purpose of the spending must be to enable the business to comply with applicable requirements under that Act.
Not every expense related to a disabled employee or applicant qualifies. According to Cornell Law School Legal Information Institute (26 U.S.C. 44), the term “eligible access expenditures” shall not include amounts described in paragraph (2)(A) which are paid or incurred in connection with any facility first placed in service after the date of the enactment of this section. This exclusion applies to amounts described in paragraph (2)(A) that are paid or incurred in connection with a facility first placed in service after the date of the enactment of the section. If a facility was first placed in service after that date, only amounts described in paragraph (2)(A) that are paid or incurred in connection with it are excluded from eligible access expenditures under this definition.
To determine if a specific cost qualifies, check if it was paid or incurred by your business. Verify that the purpose was to comply with applicable requirements under the Americans With Disabilities Act of 1990. Exclude only amounts described in paragraph (2)(A) that are paid or incurred in connection with a facility first placed in service after the date of the enactment of the section.
What the IRS and the EEOC say about cost and the tax deduction
The Internal Revenue Service outlines a specific deduction limit for businesses that have employees with disabilities. This provision applies to the "Tax benefits for businesses who have employees with disabilities" page. You should verify whether your specific accommodation costs fall into the category of items that normally must be capitalized before applying this deduction limit.
The U.S. Equal Employment Opportunity Commission provides guidance on how employers should approach the cost of accommodations. According to U.S. Equal Employment Opportunity Commission, an employer should determine whether funding is available from an outside source, such as a state rehabilitation agency, to pay for all or part of the accommodation. The same guidance states that the employer should determine whether it is eligible for certain tax credits or deductions to offset the cost of the accommodation. This appears in the "Enforcement Guidance on Reasonable Accommodation and Undue Hardship under the ADA" document.
The EEOC also clarifies how undue hardship is calculated in relation to outside funding. According to U.S. Equal Employment Opportunity Commission, the ADA's legislative history indicates that Congress wanted employers to consider all possible sources of outside funding when assessing whether a particular accommodation would be too costly. The guidance further states that undue hardship is determined based on the net cost to the employer. This distinction is critical for budgeting, as the net cost reflects the amount remaining after any outside funding or tax benefits are applied.
When you budget for an accommodation, you must look beyond the initial invoice. The IRS deduction limit of $15,000 a year for qualified expenses for items that normally must be capitalized provides a specific ceiling for certain tax benefits. The EEOC guidance directs you to check for state rehabilitation agency funding and other tax credits or deductions. Because undue hardship is based on the net cost to the employer, you must subtract any available outside funding from the total cost before evaluating the financial impact.
Filled reference table of each publisher's cost and credit statement
The following table lists the specific cost and credit statements from each publisher.
| Publisher | Cost or Credit Statement | Source Quote |
|---|---|---|
| Cornell Law School Legal Information Institute (26 U.S.C. 44) | The credit amount equals 50 percent of eligible access expenditures that exceed $250 but do not exceed $10,250. | "For purposes of section 38, in the case of an eligible small business, the amount of the disabled access credit determined under this section for any taxable year shall be an amount equal to 50 percent of so much of the eligible access expenditures for the taxable year as exceed $250 but do not exceed $10,250." |
| Internal Revenue Service | An eligible small business earned $1 million or less or had no more than 30 full-time employees in the previous year and may take the credit each year they incur access expenditures. | "An eligible small business is one that earned $1 million or less or had no more than 30 full time employees in the previous year; they may take the credit each and every year they incur access expenditures." |
| Internal Revenue Service | Businesses may claim a deduction of up to $15,000 a year for qualified expenses for items that normally must be capitalized. | "Businesses may claim a deduction of up to $15,000 a year for qualified expenses for items that normally must be capitalized." |
| Job Accommodation Network | Of 1,425 employers sharing cost information, 872 (61%) said the accommodation cost nothing; 466 (33%) reported a one-time expense with a median cost of $300; and 87 (6%) reported an ongoing annual median cost of $2,400. | "Of the 1,425 employers who shared cost information related to accommodations they had implemented, 872 (61%) said the accommodation their employee needed cost nothing; 466 (33%) reported that their accommodations incurred a one-time expense, with a median cost of $300 (n=434); and 87 (6%) said the accommodation resulted in an ongoing, annual median cost of $2,400 (n=67) to the company." |
| U.S. Equal Employment Opportunity Commission | No change or modification is required if it would cause "undue hardship," which means significant difficulty or expense focusing on the resources and circumstances of the particular employer. | "The only statutory limitation on an employer's obligation to provide \"reasonable accommodation\" is that no such change or modification is required if it would cause \"undue hardship\" to the employer.(16) \"Undue hardship\" means significant difficulty or expense and focuses on the resources and circumstances of the particular employer in relationship to the cost or difficulty of providing a specific accommodation." |
According to Cornell Law School Legal Information Institute (26 U.S.C. 44), the credit calculation applies specifically to eligible small businesses. The Internal Revenue Service defines the eligible small business test based on prior year revenue or employee count, as cited in the table above. The same agency notes the separate deduction limit for capitalized items. The Job Accommodation Network survey provides data points on employer-reported costs, distinguishing between no-cost, one-time, and ongoing expenses. The U.S. Equal Employment Opportunity Commission clarifies the limitation based on undue hardship, tying the requirement to the specific employer's resources. Use these specific statements to verify your budget against the cited limits.
Outside funding and accommodation choice
The U.S. Equal Employment Opportunity Commission advises that an employer should determine whether funding is available from an outside source, such as a state rehabilitation agency, to pay for all or part of the accommodation, according to U.S. Equal Employment Opportunity Commission. The same guidance notes that the employer should determine whether it is eligible for certain tax credits or deductions to offset the cost of the accommodation, according to U.S. Equal Employment Opportunity Commission. If there are two possible reasonable accommodations, and one costs more or is more burdensome than the other, the employer may choose the less expensive or burdensome accommodation as long as it is effective, according to U.S. Equal Employment Opportunity Commission. See Hiring Decision Debrief: Notes to a Recorded Decision.
Next step you can take today
Write down last year's earnings and the number of employees who worked at least 30 hours per week for 20 or more calendar weeks, then set those figures beside one accommodation cost.
Disabled access credit FAQ
How is the disabled access credit computed?
The credit equals 50 percent of the eligible access expenditures for the taxable year that exceed $250 but do not exceed $10,250, according to Cornell Law School Legal Information Institute (26 U.S.C. 44). This calculation applies specifically to eligible small businesses determining the credit under section 38. The formula sets a fixed floor and ceiling for the portion of costs that generates the credit.
Which two business-size tests does the tax code give?
An eligible small business is defined as one that earned $1 million or less or had no more than 30 full-time employees in the previous year, according to Internal Revenue Service. Meeting either of these two thresholds qualifies the business to take the credit each year it incurs access expenditures. The IRS specifies these limits as the criteria for eligibility.
Which facility amounts are excluded?
This exclusion applies to costs described in paragraph (2)(A) of the statute.
What does the accommodation network's survey say about cost?
Of 1,425 employers who shared cost information, 872 (61%) said the accommodation cost nothing, while 466 (33%) reported a one-time expense with a median cost of $300, according to Job Accommodation Network. Additionally, 87 employers (6%) reported an ongoing annual median cost of $2,400. These figures represent the specific results from the survey participants who provided data.
What does the EEOC say about undue hardship and outside funding?
The only statutory limitation on providing reasonable accommodation is if it would cause "undue hardship," which means significant difficulty or expense focused on the particular employer’s resources, according to U.S. Equal Employment Opportunity Commission. The guidance directs employers to consider outside funding sources, such as a state rehabilitation agency, when evaluating these costs. This definition ties the hardship determination to the specific circumstances of the employer in question.