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Tax Incentives that promote employment of qualified individuals with disabilities

The following information was compiled by the Vermont Division of Vocational Rehabilitation in response to inquires about the use of federal tax incentives by employers. Data was provided by the IRS and individuals in the Social Security Administration.

BACKGROUND

The Americans with Disabilities Act (ADA) requires businesses to make their establishments accessible to people with disabilities. Businesses that incur expenses to make buildings accessible or to accommodate workers with disabilities at the worksite may be able to take advantage of certain business tax incentives. Furthermore, there is a tax credit available to employers who hire people from targeted groups, including qualified vocational rehabilitation referrals, food stamp and Aid to Needy Families with Children recipients, and veterans.

SECTION 190 of the Internal Revenue Code permits any business to take a business deduction for qualified architectural and transportation barrier removal expenses. The maximum annual deduction is $15,000. The IRS does not track the use of Section 190 deductions, and there is no line item on the tax form to identify this information.

SECTION 44: DISABLED ACCESS CREDIT of the Internal Revenue Code permits small businesses with gross receipts of less than $1 million or with no more than 30 full time employees to take an annual tax credit of up to $10,000 for any ADA compliance expenditures they make during the year, including interpreter services. This credit is claimed on IRS Form 8826.

SECTION 51: WORK OPPORTUNITY TAX CREDIT of the Internal Revenue Code permits employers who hire people from a targeted group to take a tax credit for 35 percent of the first $6,000 in wages paid to the employee (for a maximum $2,100 credit). The employee must be:

  • a referral from Vocational Rehabilitation;
  • a member of a family who received AFDC assistance 9 out of the last 18 months;
  • a qualified veteran;
  • a qualified food stamp recipient;
  • a qualified ex-convict;
  • a qualified risk youth; or
  • a qualified summer youth employee.
IRS Form 8850 is used to verify that the individual is from one of the targeted groups, and the credit is claimed on IRS Form 5884.

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