Tax Breaks for Hiring People With Disabilities Work Opportunity Credit Take Advantage of Accessibility Credits Other Tax and Financial Incentives Related Links
Tax Breaks for Hiring People With Disabilities As a regular eSight visitor, you already know that hiring people with disabilities is a strategy that makes sense for your company, whether it's large or small. As Dupont has found year after year in more than 25 years of studies, these workers meet or exceed non-disabled workers in terms of productivity, loyalty, reliability and safety.
However, during an economic slowdown, it may be more difficult to justify taking even the minimal extra steps in choosing a disabled candidate over a non-disabled one who is equally qualified for a particular position.
But what if I offered you money?
Well, not me, actually -- but did you know that the Internal Revenue Service has tax breaks available as incentives for businesses to hire people with disabilities? Did you also know similar programs exist in individual states and in other countries?
Yes, business can have a big heart, but the "bottom line" is more than a little important, too, and sometimes plays a deciding factor in hiring decisions. So, whether you are the decision maker for your company or an advocate for an inclusive workplace, you need to know about this golden opportunity to Do Good and Do Well at the same time.
Go to Top of PageWork Opportunity Credit
The Work Opportunity Tax Credit (WOTC) allows you to defer your federal tax liability for every physically or mentally disabled person you hire via a vocational rehabilitation referral.
- The bottom line is this:
- For new hires working over 400 hours, you can receive a tax credit on 40 percent of the employee's wages (up to $6,400) for his first year of employment. For new hires working from 120 to 400 hours, you can receive a credit of 25 percent of the employee's wages for his first year of employment. Your company's deduction for wages generally must be reduced by the amount of the credit.
- Explains April15.com:
- The value of the credit is the difference between the tax savings the wage deduction would otherwise generate and the dollar-for-dollar tax reduction the credit produces plus the reduced tax deduction that's available. For example, assume a business in the 25 percent tax bracket can use all of the credits it earns in the current year and that it has $6,000 of wages qualifying for the WOTC. That $6,000 of wages will produce a $2,400 tax credit (that saves $2,400 of taxes) and a tax deduction of $3,600 ($6,000 - $2,400) that saves $900 of taxes. Thus, the total tax reduction from the $6,000 of wages is $3,300 ($2,400 + $900). If the business forgoes the credit, those same wages will provide a $6,000 tax deduction (that saves $1,500 of taxes). As a result, the credit is worth $1,800 ($3,300 - $1,500). That works out to a 30 percent after-tax return ($1,800 / $6,000) on $6,000 you were going to have to spend anyway to hire someone. [our emphasis]
The new hire must be certified and there are some limitations on this. See IRS Tax Form 8850 (Pre- Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits).
- The Washington State Department of Vocational Rehabilitation has some wise advice about how your company can use these incentives:
- Use financial incentives as a way to recover some of the costs involved in training and hiring new employees and making facilities accessible. Don't utilize financial work incentives to fill a position with a person with a disability who can't perform the essential functions of the job, with or without reasonable accommodation.
Organizations such as
HirePotential can help you find and take advantage of the WOTC.
Go to Top of Page Take Advantage of Accessibility Credits
Other tax credits, intended to defray costs for making your business accessible under public accommodations requirements of the 1990 Americans with Disabilities Act (ADA), can come in handy, too. While these are not applied directly to hiring people with disabilities, they can help you pay for changes to your physical facilities, including buildings and transportation. You will need to make these changes, if you intend to bring a person with a disability to work in those facilities -- and you need to look into whether you are already required to make your work site accessible for disabled customers or other visitors anyway.
With the Small Business Tax Credit (IRS Code Section 44, Disabled Access Credit), qualifying small businesses can receive 50 percent of costs over $250 to $10,250 in tax credits for making buildings in place before 1990 accessible to disabled persons. IRS online PDF doucument Form 8826 - Disabled Access Credit
Additionally, the Architectural/Transportation Tax Deduction (IRS Code Section 190, Barrier Removal) allows all businesses to take a tax deduction of up to $15,000 a year for expenses incurred to remove structural and transportation barriers for persons with disabilities. Some limitations exist for renovations, so check with the IRS.
Go to Top of Page
Other Tax and Financial Incentives
States
Many U.S. states have additional business financial incentives to encourage employment of blind and other disabled citizens. Check with your state's department of revenue for information relevant to your business. Here are a few examples:
- New York State's Economic Development Services Program provides additional incentives for employers hiring disabled workers.
- Iowa employers which meet certain criteria as "small businesses" are allowed an additional deduction of 65 percent of the first year wages on their Iowa income tax returns for hiring persons with disabilities.
- While not a tax credit, the Pennsylvania Office of Vocational Rehabilitation can reimburse you 50 percent of wages for on-the-job training for disabled employees.
Outside U.S. Consider these examples:
- An article in the "Warsaw Voice," entitled "Out of the Wheelchair, Into the Rat Race" describes government tax incentives for hiring people with disabilities in Poland.
- Many European countries provide relief from social security contributions employees who are disabled.
- Australia, Canada, Denmark, Greece and the United Kingdom are among the countries with programs to assist employers with the cost of adaptive equipment for disabled employees.
Go to Top of Page
