Promoting affordable accessibility courtesy of the IRS
The top reason why most sites on the web are not accessible is ignorance. Site owners, designers, and developers are not aware that accessibility should be on their radar. (And those that are familiar with their basic responsibilities in this area don’t know how to properly design or code for accessibility.) But for those reading this blog post, affordability probably represents one of the primary obstacles for most site owners in becoming more accessible.
Especially when accessibility is not taken into account when building the first time, it can be expensive to find and address the issues. (And most accessibility agencies don’t help matters when they promote pricey comprehensive audits as a first step.) That’s why we see that automated accessibility overlay vendors are so appealing to smaller businesses with limited digital budgets.
The good news is that the federal government doesn’t only mandate website accessibility under the ADA; it also offers substantial tax advantages for small businesses to undertake accessibility efforts (in both the physical and digital worlds). Under the Disabled Access Credit, small businesses can recoup 50% of their spending on accessibility (up to $5,000).
Who is eligible for the Disabled Access Credit?
Before we begin, this is a good time to remind you that we are not tax experts and the information we are providing here is not meant to replace the advice of your accountant or other tax professionals.
The short answer is that any small business is entitled to receive this $5,000 tax credit annually against their accessibility spending. But what counts as a small business?
The IRS has a simple two step test to determine whether your business meets the criteria for this tax benefit. You only need to meet one of the following criteria.
- Gross receipts for the preceding tax year of $1 million or less
- OR had 30 or fewer full time employees (defined as someone who worked for you at least 30 hours per week for 20 or more weeks).
What kinds of accessibility efforts are eligible?
Businesses can claim the Disabled Access Credit for any spending to come into compliance with the Americans with Disabilities Act (ADA). This can include improvements to a physical building (such as adding a ramp) as well as digital accessibility fixes on a website or mobile app. The IRS offers 4 broad examples of the types of expenditures that qualify:
- To remove barriers that prevent a business from being accessible to or usable by individuals with disabilities;
- To provide qualified interpreters or other methods of making audio materials available to hearing impaired individuals;
- To provide qualified readers, taped texts and other methods of making visual materials available to individuals with visual impairments;
- To acquire or modify equipment or devices for individuals with disabilities.
When it comes to your website, you can claim the Disabled Access Credit for spending on the following services and solutions:
- Accessibility remediation including content and code updates
- Targeted and comprehensive web accessibility audits
- Mobile app accessibility audits and remediations
- Accessibility training for your developers, designers, marketers, and content authors
- Remediation of PDFs
- Video closed captions and audio descriptions
- Audio-only content transcripts
How to calculate and claim your tax credit
First, let’s provide a brief explanation of tax credits for those who are not familiar. A tax deduction reduces your taxable income, which means that a $5,000 tax deduction would save you somewhere along the lines of $1,000 (with the exact amount depending on your marginal tax rate). Tax credits, on the other hand, are subtracted directly from your tax bill. This means that a $5,000 tax credit actually saves you the full $5K.
In our case the Disabled Access Credit can be claimed against your accessibility spending using the following formula:
- First $250 spent is not eligible for the refund
- For every dollar you spend after that point, you get 50% back
- The maximum credit per year is $5,000
- This tax credit is not refundable, which means that if you owe less than $5,000 in taxes for a given year, you won’t be able to get back the full $5K. But unused portions of the tax credit can be carried over to a future year.
The other qualification here is that “double-dipping” is not allowed. In other words, you cannot claim your accessibility spending for other tax credits or deductions. For more complex questions, we recommend that you consult directly with an accountant or other tax professional.
To illustrate, let’s go through a couple of different examples of accessibility projects. Let’s imagine you spent $8,000 this year on remediation-first code improvements, content accessibility updates and ongoing monitoring to maintain your accessibility over time. Of that total sum, $7,750 is eligible for the credit (after the first $250 is deducted). That means you will receive back $3,875 from the IRS.
If you spend more to commission a comprehensive WCAG web accessibility audit that costs a total of $13,250, you will run into the maximum credit (which means you can’t get a full 50% tax credit refund). In this case, you would receive the maximum $5,000 credit for the year.
You can consult the full set of instructions from the IRS on Form 8826 (PDF).
How to stretch your tax credit further
The Disabled Access Credit can be claimed by eligible businesses every tax year. This creates an interesting opportunity to structure larger accessibility projects over two calendar years in order to claim the maximum possible benefit. For example, the $13,250 audit that we introduced above exceeds the largest possible tax credit for a single year. But if the project were to take place over the course of 2 fiscal years, you could claim quite a bit more. In the second year, you can receive an additional credit of $1,375 for a total credit of $6,375. If you were intent on receiving the maximum possible credit over two years, you could increase your accessibility budget to $20,500 and receive a full $10K back in credit.
While the federal accessibility tax credit maxes out at $5,000, there is also a physical accessibility tax credit of up to $15,000. Digital or website accessibility improvements are not eligible for this deduction, but if you are undertaking physical or architectural accessibility fixes at your place of business, you should be able to claim the additional deduction on top of the Disabled Access Credit. In addition, there may be other digital accessibility tax benefits you can claim at the state level. We encourage you to do further research or enlist the help of a tax professional or accountant to learn more.
Disabled Access Credit Expansion Act of 2021
This year, Senator Tammy Ducksworth introduced legislation that would double the maximum credit and expand eligibility to more small businesses. If her bill passes, it would increase the maximum possible Disabled Access Credit to $10,000. It would also redefine small businesses for the purposes of this tax credit as those with gross receipts from $1 million to $2.5 million.
Needless to say, this law would greatly expand both the number of businesses eligible for help making their websites more accessible while also subsidizing twice as much accessibility work per business. We can only hope that this legislation passes and that it increases interest in making the web (and physical world) far more accessible than it currently is.
There’s no time like the present
If you are having trouble getting a budget allocated for digital accessibility, this information can help convince the relevant decision makers that the investment will stretch much farther than they might have imagined. And if you are the decision maker for your company or department, there is no time like the present to take advantage of this tax benefit. Eligible companies can receive the Disabled Access Credit every year, which means that delaying accessibility projects to next year is leaving money on the table; the earlier you start on accessibility, the more the federal government can subsidize your efforts.