Instructions for IRS Form 8826, Disabled Access Credit

IRS Form 8826, Disabled Access Credit, allows eligible small businesses to claim a nonrefundable tax credit to help offset costs for providing access to individuals with disabilities. This incentive is part of the general business credit and encourages businesses to make their facilities more accessible per the Americans with Disabilities Act (ADA). The credit is for expenditures aimed at improving accessibility, not all business improvement costs.

Determining Eligibility for the Credit

To qualify for the Disabled Access Credit, a business must meet the definition of an “eligible small business.” This is determined by satisfying one of two tests based on the preceding tax year’s activity. The first test is a gross receipts test; the business must have had gross receipts of $1 million or less, reduced by returns and allowances.

The alternative is an employee-based test. A business that does not meet the gross receipts requirement may still be eligible if it employed no more than 30 full-time employees during the preceding tax year. The IRS defines a full-time employee as someone employed for at least 30 hours per week for 20 or more calendar weeks. Members of a controlled group of corporations or businesses under common control are treated as a single entity when applying these tests.

Identifying Qualifying Expenditures

Eligible access expenditures are specific costs a business pays to comply with the ADA, and these costs must be reasonable and necessary. One category of qualifying expenses involves removing architectural, communication, physical, or transportation barriers. This includes installing ramps, widening doorways, modifying restrooms, or adding accessible parking spaces.

Another category covers providing auxiliary aids and services to ensure effective communication. This can include providing qualified sign language interpreters for individuals with hearing impairments or qualified readers and taped texts for individuals with visual impairments.

The final category is the acquisition or modification of equipment or devices for individuals with disabilities, such as purchasing adaptive computer equipment. Expenses related to new construction do not typically qualify. An exception exists if the expenditures are for features that go beyond the minimum accessibility standards required for new buildings.

Calculating the Disabled Access Credit

The Disabled Access Credit is equal to 50% of the eligible access expenditures that fall between $250 and $10,250 for the tax year. The first $250 of expenses is not eligible for the credit. The maximum amount of expenditures that can be used in the calculation is $10,000.

This structure results in a maximum possible credit of $5,000 per year. For example, if a business incurs $9,500 in qualifying expenditures, the credit is calculated on $9,250 ($9,500 – $250), which equals $4,625. A business must also reduce its deductible business expenses by the amount of the credit claimed, preventing a double tax benefit.

Completing and Filing Form 8826

To claim the credit, a business must complete Form 8826, reporting its total eligible access expenditures for the tax year and following the form’s instructions to complete the calculation.

After calculating the credit on Form 8826, the result is transferred to Form 3800, General Business Credit. Form 8826 must be attached to the business’s income tax return, such as Form 1040, Form 1120, or Form 1065. For partnerships and S corporations, the credit is passed through to the partners or shareholders to claim on their individual returns. Keeping detailed records and receipts for all accessibility-related expenses is necessary.