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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.

Did you know the Federal Government and many state and local governments offer financial incentives to help small businesses hire and retain workers with disabilities? Federal and state tax incentives also help businesses increase access for both employees and customers with disabilities. This webpage provides an overview of these incentives and the benefits they provide. For more information, see “Resources,” below, or consult a certified accountant.

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.

The U.S. Department of Justice (PDF) offers this example:

Cost of access improvements (restroom, ramp, widen three doors)
$20,000
Minus the maximum Disabled Access Tax Credit
- $5,000
Remaining Architectural Barrier Removal Deduction
$15,000

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:

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

U.S. Department of Labor Resources

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.

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