Are You Taking Advantage of the Disabled Access Credit?
By TOM COPELAND. Published with permission.
Did you know that there are two tax rules that benefit family child care providers who spend money caring for children with disabilities?
All child care providers (whether regulated or not) must comply with the Americans with Disabilities Act (ADA).
You must provide "reasonable accommodations" to children with disabilities. Such disabilities include: cerebral palsy, deafness, diabetes, alergies, emotional or mental illness, epilepsy, HIV, AIDS, learning disabilities, blindness, mental retardation, and more.
Most family child care providers have cared for children with disabilities during their career. In the vast majority of cases, it is no big deal. In some situations it may require spending money to make the home more accommodating.
Such expenses made to comply with the ADA can include: Braille books, books on tape, grab bars, bathroom remodeling, wider doorways, ramp, etc.
The IRS Disabled Access Credit allows you to take a 50% tax credit on such expenses over $250 and up to $10,250, for a maximum credit of $5,000.
Use IRS Form 8826 Disabled Access Credit to claim this credit. The credit may not be used to build a new home. The amount of credit from this form gets transferred onto IRS Form 1040.
Here's an example: You spend $2,000 to remodel your bathroom by installing some grab bars next to the toilet and in the bath tub, and widening the bathroom door so a wheelchair can enter. You are entitled to a $875 tax credit ($2,000 - $250 divided by 2). This credit will reduce your taxes by $875. Without this credit, you would have had to depreciate these items over 39 years.
Barrier Removal Tax Deduction
There is a second tax benefit called the Barrier Removal Tax Deduction. This allows you to claim a deduction of up to $15,000 for certain expenses on Schedule Ce, instead of depreciating them over a number of years.
Expenses that qualify for this deduction are limited to removing architectural and transportation barriers such as building a ramp, remodeling a home, or converting a van.
Here's an example: You spend $1,000 to make your van accessible for a wheelchair. Without this tax benefit, you would have to depreciate the $1,000 over 5 years (using the actual car expenses method).
If you didn't spend money on remodeling your bathroom you could claim the credit for this expense ($1,000 - $250 divided by 2 = $375).
If you did both projects, you would add up the total expense ($3,000) and subtract the amount of the credit claimed ($875) = $2,125. This is the amount to be deducted on Schedule C.
By taking advantage of these two tax benefits, you can make caring for children with disabilities a little easier.
Image credit: getagripfl.com
For more information, see my Family Child Care Tax Workbook and Organizer.
All child care providers (whether regulated or not) must comply with the Americans with Disabilities Act (ADA).
You must provide "reasonable accommodations" to children with disabilities. Such disabilities include: cerebral palsy, deafness, diabetes, alergies, emotional or mental illness, epilepsy, HIV, AIDS, learning disabilities, blindness, mental retardation, and more.
Most family child care providers have cared for children with disabilities during their career. In the vast majority of cases, it is no big deal. In some situations it may require spending money to make the home more accommodating.
Such expenses made to comply with the ADA can include: Braille books, books on tape, grab bars, bathroom remodeling, wider doorways, ramp, etc.
The IRS Disabled Access Credit allows you to take a 50% tax credit on such expenses over $250 and up to $10,250, for a maximum credit of $5,000.
Use IRS Form 8826 Disabled Access Credit to claim this credit. The credit may not be used to build a new home. The amount of credit from this form gets transferred onto IRS Form 1040.
Here's an example: You spend $2,000 to remodel your bathroom by installing some grab bars next to the toilet and in the bath tub, and widening the bathroom door so a wheelchair can enter. You are entitled to a $875 tax credit ($2,000 - $250 divided by 2). This credit will reduce your taxes by $875. Without this credit, you would have had to depreciate these items over 39 years.
Barrier Removal Tax Deduction
There is a second tax benefit called the Barrier Removal Tax Deduction. This allows you to claim a deduction of up to $15,000 for certain expenses on Schedule Ce, instead of depreciating them over a number of years.
Expenses that qualify for this deduction are limited to removing architectural and transportation barriers such as building a ramp, remodeling a home, or converting a van.
Here's an example: You spend $1,000 to make your van accessible for a wheelchair. Without this tax benefit, you would have to depreciate the $1,000 over 5 years (using the actual car expenses method).
If you didn't spend money on remodeling your bathroom you could claim the credit for this expense ($1,000 - $250 divided by 2 = $375).
If you did both projects, you would add up the total expense ($3,000) and subtract the amount of the credit claimed ($875) = $2,125. This is the amount to be deducted on Schedule C.
By taking advantage of these two tax benefits, you can make caring for children with disabilities a little easier.
Image credit: getagripfl.com
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