Small Business Series: Federal, State, and Local Disability Hiring Incentives and Resources for Small Businesses
Learn about tax incentives and the benefits they provide to small businesses.
Federal Tax Incentives
Encouraging Disability Employment
Work Opportunity Tax Credit
Private businesses that hire new employees who face barriers to employment, such as disabled people working with vocational rehabilitation (VR) agencies, recipients of Supplemental Security Income (SSI), certain veterans, and members of other target groups, may apply for the federal Work Opportunity Tax Credit (WOTC). Employers may claim the tax credit for employees who are in their first year of employment with the business and work a specific number of hours per year. Businesses must also obtain the required certification before claiming the WOTC.
According to the Internal Revenue Service (IRS), employers typically receive a maximum tax credit of $2,400 through the WOTC. This credit can be used to recoup costs for accommodations, hiring, or training, among other expenses.
To learn more about the WOTC and connect with job candidates with disabilities, contact a community partner such as your state’s workforce agency or VR agency.
Many states also offer incentives that supplement the WOTC. Learn more (see “State and Local Tax Incentives”) and read about one such program (see “Spotlight on Local Innovation”) below.
Spotlight on Local Innovation: Tacoma WOTC
In addition to participating in the federal WOTC program, small business owners operating in the City of Tacoma, Washington, can use the Tacoma Work Opportunity Tax Credit to claim an additional $1,000. This incentive is available to organizations that create a new full- or part-time permanent position and hire an eligible person with a disability (PDF). Watch this recorded webinar from EARN to learn more.
Supporting Accessibility
Disabled Access Tax Credit
Eligible small businesses that incur expenses of more than $250 to help ensure access for disabled people, whether employees or customers, can apply for a tax credit of up to $5,000 through the Disabled Access Tax Credit.
To be eligible for the Disabled Access Tax Credit, businesses must have either:
- $1 million or less in gross receipts for the preceding tax year; or
- 30 or fewer full-time employees during the preceding tax year.
Businesses can claim this credit for expenses related to things that help them ensure access for people with disabilities and comply with the Americans with Disabilities Act (ADA). Some examples of eligible expenses include:
- Adding a ramp to allow customers who use wheelchairs or other mobility aids to enter and exit the business.
- Providing sign language interpreters to allow effective communication with customers who are Deaf or hard of hearing.
- Providing equipment that makes it easier for people to receive services, such as communication devices that allow employees to interact with people who are nonspeaking.
Note that expenses related to new construction are not eligible for the Disabled Access Tax Credit. In addition, projects supporting physical access, such as ramps, need to meet the technical standards of ADA Accessibility Guidelines, when applicable.
Architectural Barrier Removal Tax Deduction
The Architectural Barrier Removal Tax Deduction encourages businesses of all sizes to remove mobility barriers for disabled people and older adults. Businesses may claim a deduction of up to $15,000 a year for qualified expenses, including renovations, equipment, and vehicle retrofits. Note that expenses connected to new construction are not eligible for this credit.
Businesses can claim the deduction by listing eligible expenses as a separate expense on their income tax return. Consult with a certified accountant as some limits apply.
Maximizing Incentives
To make the most of federal tax incentives supporting access for people with disabilities, businesses may use both the Disabled Access Tax Credit and the Architectural Barrier Tax Deduction in the same tax year. For example, if a small business’s expenses exceed the maximum allowable for the Disabled Access Tax Credit, it can deduct an additional amount using the Architectural Barrier Removal Tax Deduction.
State and Local Tax Incentives
Some state tax credit programs based on the federal WOTC support hiring people with disabilities. Other incentives relate to accessibility improvements, employment support, or financial assistance to cover the cost of assistive technology or other workplace accommodations.
Access the following resources to request more information about tax incentives in your area that support workplace accessibility:
- Your state’s Department of Labor
- Your state’s workforce agency and WOTC state coordinators, who can also connect you with job seekers with disabilities
- Your local Chamber of Commerce or the U.S. Chamber of Commerce
- The Small Business Development Center in your area
- EARN’s Employer Financial Incentives webpage
To connect with workers with disabilities, reach out to the Council of State Administrators of Vocational Rehabilitation’s National Employment Team or your state’s VR agency.
Examples of State Tax and Other Incentives
Incentives to support disability employment vary from state to state. Below are three examples of state incentives that help small businesses hire and retain workers with disabilities. Be sure to contact your state government for more information.
- James Patrick Memorial Work Incentive Personal Attendant Services and Employment Assistance (JP-PAS) Program (Florida). This program provides monthly stipends to help disabled workers pay for personal assistance to maintain employment. Learn more by visiting the JP-PAS Program site.
- State Tax Credits for Barrier Removal and Employment Supports (Arizona). Arizona’s state tax credits are similar to the federal Disabled Access Tax Credit and Architectural Barrier Removal Tax Deduction. Read this tax credit brief (PDF) for more information.
- Income Tax Benefit for Employers Who Hire People with Disabilities (Iowa). Small businesses in Iowa that hire disabled people can take a deduction on their income tax returns. Learn more from the Iowa Department of Revenue.
Spotlight on State Innovation: Minnesota Employer Reasonable Accommodation Fund
The Minnesota Employer Reasonable Accommodation Fund helps small and midsize businesses learn about and pay for reasonable accommodations for job applicants and employees with disabilities. Businesses can receive no-cost consultation on the ADA and reimbursement for eligible expenses related to reasonable accommodations. Watch this recorded webinar from EARN to learn more.
Resources
EARN Resources
- Small Business Toolkit: Find information and resources to help small businesses build talent pipelines; address workforce needs; and learn about recruiting, hiring, retaining, and advancing people with disabilities.
- Local and State Disability Employment Incentives and Resources for Small Businesses: Watch this recorded webinar to learn about programs in Minnesota and Tacoma, Washington, that support disability employment.
- Employer Financial Incentives: Learn about federal and state tax incentives that encourage businesses to hire people with disabilities and support workplace accessibility.
- Employer Tax Incentives Available from the Federal Government: Find out about tax incentives offered by the Federal Government to encourage private employers to hire disabled people.
U.S. Department of Labor Resources
- How to File a WOTC Certification Request: Find instructions for filing a WOTC certification request.
- WOTC Eligibility Desk Aid (PDF): Learn about the eligibility criteria for the WOTC and find examples of how to document the employment of various target groups.
Additional Resources
- National Disability Institute: Small Business Hub: Explore tools and training opportunities from the National Disability Institute that support small business owners and entrepreneurs with disabilities.