Your Guide to Tax Savings: How Hiring People with Disabilities Can Benefit Your Business

by | Jul 17, 2023

As the backbone of the American economy, small businesses account for a large portion of job creation. To catalyze continued growth and diversity in the workforce, the Federal Government offers various tax benefits for businesses that hire and accommodate individuals with disabilities. Harnessing these incentives can not only help businesses fulfill their social responsibility commitments but also contribute to their financial health. 

These tax incentives include the Disabled Access Credit, the Architectural Barrier Removal Tax Deduction, and the Work Opportunity Tax Credit. Leveraging these benefits can help businesses offset costs associated with making their workspaces more accessible and inclusive.

The Disabled Access Credit is a non-refundable tax credit available to small businesses that incur expenses to ensure accessibility for individuals with disabilities. To qualify for this benefit, businesses must have earned $1 million or less or had no more than 30 full-time employees in the previous year. The credit is applicable for costs incurred to remove access barriers, provide interpreters for hearing-impaired employees, and acquire or modify equipment for employees with disabilities. However, expenses related to facilities first used after November 5, 1990, are not eligible for this credit.

The second incentive, the Architectural Barrier Removal Tax Deduction, encourages businesses of all sizes to remove architectural and transportation barriers that hinder the mobility of individuals with disabilities. Businesses can claim a tax deduction of up to $15,000 a year for expenses related to making facilities or public transportation vehicles more accessible. This deduction can be used in conjunction with the Disabled Access Credit, provided the expenses meet the requirements of both sections.

The Work Opportunity Tax Credit (WOTC) is another powerful incentive that promotes hiring individuals who have faced significant employment barriers, including persons with disabilities. The WOTC allows businesses to claim a tax credit equal to 40% of the first $6,000 in wages paid to each qualified new hire, resulting in a maximum benefit of up to $2,400 per person. To qualify, the new hire must be certified as a targeted group member and work at least 400 hours within the first year of employment.

In addition to these general incentives, the Veterans Opportunity to Work (VOW) to Hire Heroes Act of 2011 extends the WOTC to employers who hire military veterans with service-connected disabilities. This extension can provide first-year wage reimbursements of up to $4,800 for veterans hired within a year of leaving the armed forces.

While these tax benefits can provide significant savings, it's crucial for businesses to be aware of the specific conditions and requirements associated with each. Businesses should refer to the IRS publications and forms, such as Form 8826 for the Disabled Access Credit and Form 5884 for the Work Opportunity Credit, for detailed information. 

Hiring individuals with disabilities is not just a socially responsible move. It's also a strategic decision that can bring financial benefits and foster a diverse and inclusive workplace. It's a win-win for businesses and the community alike. By leveraging the available tax incentives, businesses can create a more inclusive society while improving their bottom line.

If you have any questions or need some more information on tax incentives and hiring people with disabilities, contact Freese, Peralez, & Associates today. We are currently taking on new clients and we would love to help your business succeed.