How the Disabled Access Credit (DAC) Can Reduce Your Tax Liability
The Disabled Access Credit (DAC) is an excellent tax incentive for small businesses looking to improve accessibility for individuals with disabilities and meet their compliance requirements in ADA website lawsuits. Whether you’re investing in physical accommodations like wheelchair ramps or making your website ADA-compliant, this tax credit can help offset costs while ensuring inclusivity.
In this guide on tax savings for businesses, we’ll break down how the DAC credit works, how to apply it on your tax return, and answer some common questions about whether this credit means the government is giving you money back.
What is the Disabled Access Credit (DAC)?
The Disabled Access Credit is a federal IRS tax credit designed to help small businesses cover the costs of making their facilities and services accessible to people with disabilities. It was introduced under the Americans with Disabilities Act (ADA) to encourage businesses to comply with accessibility laws while reducing financial barriers.
If your business spends money on ADA-compliant modifications, the government will reduce your IRS tax liability by up to $5,000 per year. Here is the form you need: IRS Form 8826 – Disabled Access Credit
Eligibility Criteria:
- Business Size: Gross receipts of $1 million or less, or no more than 30 full-time employees in the previous year. irs.gov
Eligible Expenses:
- Physical Modifications: Installing ramps, widening doorways, modifying restrooms for accessibility.
- Digital Enhancements: Making websites ADA-compliant, such as adding alt text, keyboard navigation, or screen reader support.
- Communication Aids: Providing sign language interpreters, Braille materials, or assistive listening devices.
How Does the DAC Credit Work?
The credit covers 50% of eligible expenses between $250 and $10,250, with a maximum credit of $5,000 per year. Calculation Example:
- If you spend $5,000 on accessibility improvements:
- Subtract $250 from the total: $5,000 – $250 = $4,750
- Divide 50% of that amount: $4,750 / 2 = $2,375
- Your tax credit = $2,375
- If you spend $10,250 or more:
- Subtract $250 from the total: $10,250 – $250 = $10,000
- Deduct 50% of that amount: $10,000 / 2 = $5,000
- Your tax credit = $5,000 (maximum allowed)
This means that if you spend $10,250 or more, you’ll get the full $5,000 tax credit to reduce your tax bill.
Eligible Expenses:
- Making website content accessible (WCAG 2.2 AA compliance).
- Adding closed captioning or sign language interpreters.
- Providing assistive listening devices.
- Installing wheelchair ramps, automatic doors, or Braille signage.
Tax Credit vs. Tax Deduction: Understanding the Difference
What is a Tax Deduction?
- Function: Reduces your taxable income.
- Impact: The actual tax savings depend on your marginal tax rate.
- Example: A $1,000 deduction in the 22% tax bracket saves you $220 in taxes.
What is a Tax Credit?
- Function: Provides a dollar-for-dollar reduction of your tax liability.
- Impact: Directly decreases the amount of tax you owe.
- Example: A $1,000 tax credit reduces your tax bill by $1,000.
Tax credits are generally more beneficial than deductions of the same amount because they directly reduce the tax owed, whereas deductions lower the income subject to tax.
How to Apply the DAC Credit on Your Tax Return
- Track and Document Expenses
Keep detailed records and receipts for all accessibility-related improvements. - Complete IRS Form 8826 (Disabled Access Credit)
- List the total eligible expenses.
- Calculate the credit using the 50% rule (subtract $250, divide in 2)
- Report the final credit amount.
- File Form 8826 with Your Business Tax Return
- If you are an S-Corp, the credit is passed through to your personal tax return.
- If you don’t owe enough taxes in a single year, the unused portion can carry forward to future years.
Is the Government Giving You Money Back?
The DAC is a non-refundable tax credit, which means:
- It reduces the amount of taxes you owe (dollar-for-dollar).
- If your total tax bill is $6,000 and you qualify for a $5,000 DAC credit, your final tax due is $1,000.
- However, if you only owe $3,000 in taxes, you can carry forward the remaining $2,000 to future years.
Important: This credit does not result in a direct refund beyond the amount you owe.
How the Disabled Access Credit (DAC) Can Benefit Your Small Business
Making your business accessible to individuals with disabilities is not just about compliance—it’s about inclusivity, reaching more customers, and taking advantage of valuable tax incentives. The Disabled Access Credit (DAC) is a federal tax credit designed to help small businesses cover the costs of ADA-compliant upgrades, from physical accommodations like wheelchair ramps to website accessibility improvements.
FAQs About the Disabled Access Credit
- Who qualifies for the DAC credit?
Any small business that:
- Has 30 or fewer full-time employees OR
- Has $1 million or less in revenue annually
- Incurs costs to improve accessibility.
- What expenses qualify for the credit?
- Digital accessibility fixes (website compliance with WCAG 2.2 AA, screen reader compatibility).
- Communication accessibility (Braille documents, sign language interpreters, assistive listening devices).
- Physical accessibility improvements (ramps, elevators, accessible restrooms).
- How is the credit different from a tax deduction?
A tax deduction reduces taxable income, while a tax credit directly reduces the taxes you owe.
For example:
- A $5,000 tax deduction reduces taxable income, potentially saving $1,000–$1,500 in taxes
- A $5,000 tax credit directly reduces your tax bill by $5,000.
The tax credit is stronger and more beneficial. It’s really a no-brainer for any qualified business to use.
- Can I claim the DAC credit every year?
Yes! You can claim the credit annually if you continue making qualifying accessibility improvements and maintaining accessibility through periodic audits as you update your website.
- Can I combine the DAC credit with other tax benefits?
Yes! You can also claim the ADA tax deduction (up to $15,000) for larger accessibility improvements, but you cannot claim both a credit and a deduction for the same expenses.
- Does this apply to website accessibility?
Yes! If you invest in website remediation to comply with WCAG 2.2 AA (such as adding alt text, keyboard navigation, or screen reader support), these expenses may qualify.
- What if my tax liability is lower than the credit?
If your business doesn’t owe enough taxes to use the full credit in one year, the unused portion can be carried forward to future tax years.
Great Tax Incentives for Small Businesses
Running a small business comes with many financial challenges, but the IRS offers several tax incentives to help you lower your costs and improve profitability. The Disabled Access Credit (DAC) is just one of many tax breaks available. Others include:
- Work Opportunity Tax Credit (WOTC) – Reduces taxes when hiring employees from certain target groups.
- Research & Development (R&D) Tax Credit – Provides savings for businesses developing new products, software, or technology.
- Home Office Deduction – Helps business owners who use part of their home exclusively for work.
- Section 179 Deduction – Allows businesses to deduct the full cost of equipment purchases.
Final Thoughts
For small businesses investing in physical and digital accessibility, the Disabled Access Credit (DAC) is a valuable tool to offset costs and lower taxes.
If your business is considering website accessibility improvements, EcomBack can help ensure your website is ADA-compliant and eligible for the DAC credit.
Need Help Making Your Website Accessible?
At EcomBack, we specialize in helping businesses enhance their digital accessibility. Contact us today for a free accessibility audit and learn how we can assist you in making your website ADA-compliant.
