Tax Credits and Hiring Incentives for Businesses

There are three federal tax incentives available to help employers cover the cost of accommodations for employees with disabilities and to make their places of business accessible for employees and/or customers with disabilities:

  1. Work Opportunity and Welfare-to-Work Tax Credit

    The Employment Development Department is the Work Opportunity and Welfare-to-Work Tax Credit (WOTC) certifying agency for California employers. The WOTC has two purposes:

    • To promote the hiring of individuals who qualify as a member of a target group, and

    • To provide a federal tax credit to employers who hire these individuals.

    An employer may qualify for a tax credit of up to $8,500 if the employee is a member of a designated target group and meets that group's specific requirements.

    There are nine target groups for WOTC eligibility:

    1. Qualified recipients of Temporary Assistance to Needy Families (TANF).

    2. Qualified veterans who are receiving Food Stamps.

    3. Qualified economically disadvantaged ex-felons hired no later than one year after conviction or release from prison.

    4. High-risk youth ages 18 through 24 who reside in a federally designated Empowerment Zone, Enterprise Community, or Renewal Community.

    5. Vocational Rehabilitation referrals.

    6. Qualified summer youth ages 16 through 17 who reside in a federally designated Empowerment Zone, Enterprise Community, or Renewal Community and have not previously worked for the employer seeking this tax credit.

    7. Qualified Food Stamp recipients ages 18 through 24.

    8. Qualified recipients of Supplemental Security Income (SSI).

    9. Long-term recipients of TANF/Aid to Families with Dependent Children (AFDC). (Individuals who began work on or after January 1, 1998.)

    The Employment Development Department is the WOTC authorizing agency for California employers.

    For more information on the WOTC for California businesses, please contact the WOTC Coordinator at:

    Employment Development Department
    Job Service Division, MIC 37
    800 Capitol Mall
    Sacramento, CA 95814
    1-866-593-0173 or 916-654-9715
    (FAX 916/654-8932)

  2. Small Business Tax Credit: IRS Code Section 44, Disabled Access Credit

    What is it? Small businesses may take an annual tax credit for making their businesses accessible to persons with disabilities. The total disabled access tax credits taken in 1996 on corporate income tax returns by all industries totaled $11,865,000, according to the IRS.

    What are the eligibility requirements? Small businesses that in the previous year earned $1 million or less in gross receipts or had 30 or fewer full-time employees are eligible for the Small Business Tax Credit.

    What expenses are covered? The tax credit is available every year and can be used for a variety of costs such as:

    • Sign language interpreters for employees/customers who have hearing impairments

    • readers for employees/customers with visual impairments

    • the purchase of adaptive equipment or the modification of equipment

    • printed materials in alternate formats (e.g., Braille, audiotape, large print)

    • the removal of architectural barriers in buildings or vehicles

    • other similar services (i.e., use of a job coach or a co-worker to provide support to an employee with a disability).

    What expenses are NOT covered? The tax credit does not apply to the costs of new construction, and a building being modified to accommodate the disabled must have been placed in service before November 6, 1990.

    What is the amount of the tax credit? The credit is 50% of expenditures over $250 but not to exceed $10,250, for a maximum benefit of $5,000.

    How can this credit be claimed? Businesses can claim the Disabled Access Credit on IRS Form 8826.

    For more information on the Small Business, Disabled Access Credit contact the Internal Revenue Service at http://www.irs.gov/

  3. Architectural/Transportation Tax Deduction: IRS Code Section 190, Barrier Removal

    What is it? Businesses may take an annual deduction for expenses incurred to remove physical, structural and transportation barriers for persons with disabilities.

    What are the eligibility requirements? All businesses are eligible.

    What expenses are covered? It can be used for a variety of costs to make a facility or public transportation vehicle owned or leased for use in the business more accessible to and usable by persons with disabilities. Examples of deductions include:

    • providing accessible parking spaces, ramps, and curb cuts

    • providing telephones, water fountains, and restrooms that are accessible to persons using wheelchairs

    • making walkways at least 48 inches wide and providing accessible entrances to buildings including stairs and floors.

    What expenses are NOT covered? The deduction may not be used for expenses incurred for new construction, completion of renovation to a facility or public transportation vehicle, or for normal replacement of depreciable property.

    What is the amount of tax deduction? The Internal Revenue Service (IRS) allows a deduction of up to $15,000 per year for qualified architectural and transportation barrier removal expenses.

    How can this expenditure be deducted? Businesses should follow the instructions found in IRS Publication 907 and in IRS Publication 535 entitled: Business Expenses. It is important to note that businesses may not take a deduction and a tax credit on the same expenditure.

    For more information on the Architectural/Transportation Tax Deduction, IRS Section 190, contact the Internal Revenue Service at http://www.irs.gov/.

 

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For Workforce Development questions, or to request the contact information of an Employment Coordinator in your area, please email us at WDSInfo@dor.ca.gov

StarSuccess Story

"We didn't hire Fidel because of his disability; we hired him because of his background in construction, office skills, motivation and determination."

Dio Martinez, Manager
Remedial Construction Services, Inc