April 19, 2024

ADA tax credit: A little-known tax credit for small businesses

In this article
You might like
No items found.
Spending made smarter
Easy-to-use cards, spend limits, approval flows, vendor payments —plus an average savings of 5%.1
|
4.8 Rating 4.8 rating
Error Message
No personal credit checks or founder guarantee.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Get fresh finance insights, monthly
Time and money-saving tips,
straight to your inbox
|
4.8 Rating 4.8 rating
Thanks for signing up
Oops! Something went wrong while submitting the form.
Table of contents
This post is from Ramp's contributor network—a group of professionals with deep experience in accounting, finance, strategy, startups, and more.
Interested in joining? Sign up here.

The Americans with Disabilities Act (ADA) is a legislation aimed at guaranteeing equal rights and opportunities for individuals with disabilities. It is commonly associated with physical accessibility measures like ramps and accessible bathrooms, however, its significance in the digital sphere is often unnoticed.

In this article, we will explain the significance of ADA compliance in digital contexts, with a focus on how businesses can leverage the ADA tax credit through comprehensive accessibility measures and gain up to $5000 tax credit along with special immediate expensing methods. 

What are the benefits of the ADA tax credit? 

The ADA tax credit, found in Section 44 of the IRS Code, is intended to aid businesses in implementing accessible practices in line with the ADA. 

This tax credit covers 50% of eligible access expenditures incurred in the previous tax year, up to a maximum expenditure limit of $10,250. However, the first $250 of expenditures is not eligible for the credit. Therefore, the maximum credit for a business is $5,000.

Let's say a business spends $8,000 on an accessibility solution like accessWidget for ADA web compliance. After subtracting the initial $250, the remaining $7,750 is eligible for the tax credit. The business would receive 50% of $7,750, which amounts to $3,875 in credit. Therefore, the business would only pay $4,125 per year for accessWidget. 

In addition to this, the remaining amount can be immediately expenses under IRC 190 (up to a $15,000 limit)!  The little-known Code Section is important to understand, as otherwise the items may be improperly depreciated over a 5-year period. 

Who is eligible for the ADA tax credit?

To qualify for the ADA tax credit, businesses need to meet specific criteria. This credit is accessible to businesses with annual revenues of $1,000,000 OR less or those employing 30 or fewer full-time workers in the previous year. This inclusive approach ensures that businesses of varying sizes can benefit from this valuable incentive. 

For example, a business with $1,500,000 in revenue but 5 FTEs would qualify for the credit, but a business with $1,500,000 in revenue and 31 FTEs would not. 

How to utilize ADA tax credit through web accessibility?

Websites, apps, and digital items serve as essential platforms offering information, services, and products to diverse users. Websites must be accessible to individuals with disabilities, allowing them to navigate, interact, and engage with online content effectively. 

The ADA tax credit does apply to businesses that invest in web accessibility solutions. 

A range of accessibility practices and implementation methods are included in the list of qualifying expenditures for the ADA tax credit. These include homepage adjustments, page structure and hierarchy, live chat support, and messaging. Paid-for services such as file and media accessibility also qualify as expenditures.  

As always, these items should be discussed with your tax advisor as every business may implement these items differently. 

How is the ADA tax credit claimed?

Claiming the ADA tax credit is a straightforward process. The steps are:

  1. Throughout the year, track all eligible expenses. Unsure?  Most companies will be able to tell you if the purchase in question is ADA-eligible or not. 
  2. Confirm your business's eligibility for the tax credit based on the criteria laid out above.
  3. Submit eligible information to your tax preparer and they will complete Form 8826.
  4. Consult with a CPA or tax strategist to ensure accuracy and compliance.

One crucial point is to consult with a CPA or tax strategist to ensure accuracy and compliance. They will guide you through the application process and help you determine the appropriate amount spent on accessibility efforts.

Putting it together: ADA tax credits for web accessibility

Digital accessibility is crucial for modern businesses. The ADA tax credit offers a valuable incentive for businesses to demonstrate their commitment to inclusivity, enhance user experience, and achieve substantial tax savings. 

Don’t fall into the trap of thinking the ADA credit is only available to businesses with physical infrastructure.  Today’s dynamic workplace presents opportunities for digital businesses to claim this credit when they open up their virtual doors to ADA compliance. 

By integrating accessible practices and complying with ADA regulations, businesses create an inclusive online environment that benefits individuals with disabilities and expands their customer base.

Simplify your expense management with Ramp

Ramp has you covered as you grow your business. With Ramp, you can assign unlimited virtual cards, stay on top of your business expenses with Ramp's expense management software, and access working capital. Our corporate cards connect with QuickBooks, NetSuite, Xero, Square Payroll, and other accounting software. You can give Ramp a try to see how it can grow your business.

The information provided in this article does not constitute accounting, legal or financial advice and is for general informational purposes only. Please contact an accountant, attorney, or financial advisor to obtain advice with respect to your business.

Try Ramp for free
Error Message
No personal credit checks or founder guarantee.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Ramp is dedicated to helping businesses of all sizes make informed decisions. We adhere to strict editorial guidelines to ensure that our content meets and maintains our high standards.

FAQs

Don't miss these

No items found.

How Mindbody & Classpass saved time, enhanced visibility, and improved usability with Ramp

“We were going to hold office hours, but it was so quiet that we never needed to. All the feedback was positive -- it was very easy to roll out.”
Heather Bruzus, Principal Accountant, Mindbody & Classpass

How Rarebreed Veterinary Partners Prepared for Scale with Ramp

“I can look in Ramp and see my spend for the month immediately. I don’t have to go on 14 different platforms. It’s all right there.”
Eric Chabot, VP of Accounting & Controller, Rarebreed Veterinary Partners

How Tomo drove efficiency and slashed time to close with Ramp

"Bringing our close timeline down by half has given us so much more time for projects and analysis.”
Eric Ho, SVP, Head of Finance, Tomo

How Crowdbotics streamlined, centralized, and saved with Ramp

“We switched from our legacy provider to Ramp in under a week and heard zero complaints."
Miles Lavin, VP of Strategic Finance, Crowdbotics

How Ramp Helped REVA Air Ambulance Save Time, Improve Visibility, and Gain Peace of Mind

“We were able to mold Ramp to our company to set it up as needed within departments. But the biggest selling feature to us was the automatic, real-time integration with Sage.”
Seth Miller, Controller, REVA

How Heyday Skincare gained control over 23+ entities with Ramp

“Ramp has been a saving grace by organizing and consolidating systems and giving us real time visibility across 23 entities.”
Shawn Gordon, Sr. Accounting Manager, Heyday Wellness

How Ramp helped Rustic Canyon Restaurant Group promote a culture of financial awareness and responsibility

"Ramp has helped promote a culture of awareness and accountability, there's no swipe your card and forget about it, people are more attuned to why and how they are spending."
Derek Arnette, Controller, Rustic Canyon Restaurant Group