Employing People with Disabilities

Employing people with disabilities can result in tax benefits for small business.

If your business spends money to accommodate an employee(s) with disabilities it may qualify your business for special tax credits and deductions. Tax credits for making accommodations for disabled employees include the Disabled Access Credit and the Work Opportunity Credit.

What is the Disabled Access Credit and how do you qualify?

Need to remove architectural and transportation barriers to access? You can generally deduct these costs. An eligible small business that incurs an expense to provide access to its premises for employees with disabilities may qualify for the Disabled Access Credit (DAC). An eligible small business is one that earned $1 million and had no more than 30 full-time employees in the previous year. Expenses for barrier removal, that are paid or incurred in connection with any facility first placed in service after November 5, 1990, are not eligible expenses for the DAC.

The DAC is a nonrefundable credit. An eligible small business may claim the credit for each year they incur disabled access expenditures. [See Form 8826, Disabled Access Credit, for information.]

What is the Work Opportunity Tax Credit and how do you qualify?

The Work Opportunity Tax Credit, or WOTC, provides a tax credit for businesses that employ individuals from certain target groups that have faced significant barriers to employment. One of the WOTC’s target groups is workers with disabilities.

The WOTC may be claimed by any employer that hires and pays, or incurs wages for, employees who are certified by a state or local workforce agency as being a member of one of the WOTC’s targeted groups.

Note: to claim the WOTC an employer must obtain certification from the appropriate State Workforce Agency that an individual is a member of a targeted group BEFORE the individual is hired.

Generally, the WOTC is equal to 40% of up to $6,000 of wages ($2,400) paid or incurred for a qualified individual who:

  1. is in their first year of employment;
  2. is certified as being a member of a targeted group; AND
  3. performs at least 400 hours of services for that employer.

A 25% rate applies to wages for individuals who perform fewer than 400 but at least 120 hours of service for the employer.

For more information about the Work Opportunity Tax Credit, call RMS Accounting at 954-563-1269.