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Deploy Peerly's advanced website accessibility solutions without refactoring your website's existing code and ensure a comprehensive legal & regulatory compliance framework covering ADA, Section 508, WCAG 2.1 AA, and much more.
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According to the ADA, businesses and organizations are required to remove the “barriers” that hinder people with disabilities from accessing and enjoying the perks of various “places of public accommodation,” including stores, theaters, bars, hotels, schools and recreation facilities. Improving access to places of public accommodations, however, can be very costly.
The ADA tax credit, established under Section 44 of the Internal Revenue Service (IRS) Code, was enacted in 1990 to help small businesses cover ADA-related compliance costs, including:
• Creating braille documents
• Provision of sign language interpreters for the hard of hearing
• Allocation of screen readers for people with visual disabilities
• Building ramps
• Provision of audio tracks to cater to visually impaired individuals
Section 44 ADA tax credit of the IRS Code recognizes the additional costs of making ADA-related compliance adjustments. To assist businesses in complying with the ADA, the federal code allows organizations that incur expenses for making ADA accommodations to qualify for up to $5,000 ADA compliance tax credit.
When Congress enacted the Section 44 ADA tax credit in 1990, however, the internet was still in its infancy, making ADA website compliance subject to numerous interpretations.
In July 2010, four Advance Notices of Proposed Rulemaking were published, prioritizing the inclusion of websites and mobile apps to the list of “barriers” that establishments and businesses must actively improve to provide equitable access to everyone.
With the revised regulations, Section 44 ADA tax credit of IRS code now also covers ADA compliance website optimization costs. This means businesses and organizations that make necessary ADA compliance website updates to make their platform more accessible to the general public can now be eligible for ADA tax incentives.
Over the past few years, everyone from non-profit organizations to local businesses and corporations have been sued for failure to meet the ADA website compliance standards.
With the IRS ADA tax credit, you can:
1. Avoid ADA Website Compliance Lawsuits
A UsableNet study revealed that more than 66 percent of top 500 online retailers received ADA website compliance lawsuits from 2017 to 2019. Of those sued, about 40 percent faced more than one ADA compliance website indictment. The ADA compliance website tax credit not only eliminates your worries about additional expenses but also allows you to avoid ADA compliance website litigation.
2. Get ADA Tax Incentives
On average, ADA compliance website audits start at around $1,500 and the actual work ranges from $3,000 to $5,000, depending on your site’s current state. The ongoing audit typically costs $500 to $1,000 per month, but it may vary based on your site’s size and scope. Depending on your ADA IRS tax credit eligibility, you can acquire an ADA website compliance tax credit and/or ADA tax deduction of up to $5,000. You can use your ADA tax incentives for other website optimization expenses or brand improvements.
3. Ensure Equal Access to Your Website
As a business owner, it’s your responsibility to make your brand more accessible to your customers, employees and the general public. The IRS ADA tax credit reform recognizes that most companies are avoiding all additional expenses, especially during the current economic crises. With the tax credit for ADA compliance, you don’t have to stall your ADA compliance website updates. The ADA tax credit for website accessibility makes it easier for you to expand your website’s online reach and facilitate your page visitors’ data gathering and decision-making process.
It’s a good idea for any business to invest in trusted ADA compliance services and take advantage of the ADA compliance website tax credit. A reputable web design company can help you offset the cost of ADA-related accommodations while protecting your website from lawsuits.
The U.S. Department of Justice provides two tax incentive packages for businesses and organizations, depending on their ADA IRS tax credit qualifications:
ADA Tax Credit
Tax credits for ADA accommodations are deducted directly from the taxes you owe to the government.
Eligible businesses may take an ADA compliance website tax credit of up to $5,000 to offset the expenses incurred to comply with the ADA requirements. Keep in mind that the first $250 you spend on improving your web accessibility is not included in the ADA compliant tax credit calculation. Qualified expenditures should be at least $250 and must not exceed $10,250 for a taxable year.
To calculate your ADA website compliance tax credit, simply add your total ADA compliance website costs and subtract $250. Divide this amount by two to get the total ADA compliance tax credit you’ve earned. Your tax credit for ADA compliance should be 50 percent of your eligible expenditure, up to a maximum of $10,250.
For example, let’s say you’ve spent $1,500 on ADA compliance website audits and $4,500 for web accessibility optimization. Your total tax credit for ADA compliance for this year would be $2,875.
Total Qualified Expenditure: $1,500 + $4,500 = $6,000
Subtract $250: $6,000 – $250 = $5,750
Divide by two: $5,750/2 = $2,875
The ADA tax credit form 8826 is used to claim the IRS ADA tax credit. Organizations may take the ADA compliance tax credit for each year that they make an eligible website accessibility expenditure.
ADA Tax Deduction
The ADA tax deduction applies to all businesses that made ADA accommodations, with a maximum deductible amount of $15,000 per year. This means even if you don’t qualify for the ADA compliant website tax credit, you may still be eligible for the ADA tax deduction.
ADA tax deduction gives you a dollar-for-dollar reduction of your total tax liability.
For example, let’s say you’ve made ADA compliance website updates two years in a row and $2,875 was subtracted from your taxes last year. This year, your total ADA website compliance costs $3,500. This amount will be deducted from your total tax liability, dollar-for-dollar. The IRS considers this an annual ADA tax incentive, so you’re qualified for another ADA tax deduction.
For more information on the ADA tax deduction, check out IRS Publication 535.
Combined ADA Tax Incentives
In some cases, small businesses may qualify for both ADA compliant website tax credit and ADA tax deduction if their total ADA compliance website expenditures exceed $10,250.
For example, if you’ve spent $18,500 on fixing your website’s ADA errors, you can use the ADA tax incentives in combination. You may first claim the $5,000 ADA tax credit for website accessibility. Any eligible ADA website compliance costs over $10,250 would be qualified for ADA tax deduction.
If your total tax credits for ADA accommodations exceed your total tax bill, you may carry forward the unused portion of your ADA tax incentives to the following year.
The IRS lays out specific criteria for all ADA tax incentive packages. Be sure to consult with a professional tax preparer for your particular situation.
Section 44 ADA tax credit of the IRS code states that businesses with total revenue of $1 million or less in the prior tax year or companies with no more than 30 full-time employees are qualified for tax credits for ADA accommodations.
An employee is considered full-time if he or she completed at least 30 hours of work per week for 20 or more calendar weeks in the taxable year.
Eligible expenditures include ADA compliance website costs for:
✓ Removing barriers that hinder persons with disabilities from accessing your webpages
✓ Making audio materials available to hearing-impaired individuals
✓ Making visual materials accessible to people with visual impairments
✓ Modifying website elements to cater to people with disabilities
Any organization that incurs ADA compliance website expenditures and meets the criteria mentioned above may start filling out their ADA tax credit form 8826 and take the next steps to claim their tax credits for ADA accommodations.
The ADA tax credit form 8826 provides general instructions on how you can claim your ADA IRS tax credit. Follow these steps to apply for ADA tax credit for website accessibility:
1. Enter your total qualified ADA compliance website expenditures on Line 1.
2. Multiply the amount by 50 percent to determine your ADA compliant tax credit.
3. Enter the amount of the ADA tax credit on Form 3800 General Business Credit along with other tax credits you’re applying.
Keep in mind that the time needed to complete and file your ADA tax credit form 8826 may vary depending on your specific situation. Always consult with your tax preparer before filing for any tax credit to ensure your eligibility.
ADA tax credit for website accessibility presents a big advantage for small businesses and organizations that struggle to meet the ADA compliance requirements. And any size business that invests its time, money and resources in making its website available for public consumption gains lucrative opportunities to create memorable brand interactions and achieve long-term profitability.
Don’t pass up on the opportunity to improve your website usability and avoid ADA compliance penalties.
At Peerly, we provide comprehensive ADA compliance services to help more companies and institutions claim their ADA compliance tax credit and gain a competitive edge. We offer a free ADA site audit and cover the installation of the ADA compliance tool, placement of accessibility policy on your website and the customization of your ADA compliant widget to fit your existing site design.
Get in touch with us and let us make your website ADA compliant!