ADA Remodeling

Can ADA Remodeling Qualify for Tax Deductions or Financial Assistance?

Making ADA-compliant renovations can be a significant investment, but for homeowners or businesses looking to improve accessibility, there may be financial relief available in the form of tax deductions, credits, and grants.

These financial incentives are designed to encourage accessibility improvements, especially for individuals with disabilities and seniors who want to age in place. Below is a detailed guide on potential tax deductions, credits, and financial assistance programs available for ADA-compliant remodeling projects.

ADA Remodeling

1. Tax Deductions for Homeowners Making ADA-Compliant Renovations

For individual homeowners, certain ADA-compliant renovations may be considered a medical expense under IRS guidelines. These renovations must be directly related to accommodating a disability, and the cost must exceed the value they add to the home. Here’s how it works:

Medical Expense Deduction

  • The IRS allows homeowners to deduct medical expenses, including certain home modifications, as long as they meet specific conditions. ADA-compliant modifications that accommodate an individual’s disability may qualify as deductible medical expenses under IRS Publication 502.
  • Examples of qualifying modifications include widening doorways, installing ramps, adding handrails or grab bars, lowering kitchen countertops, and modifying bathrooms with accessible features like roll-in showers or accessible sinks.
  • Eligibility: To qualify, the renovation must be considered medically necessary to assist a person with a disability, and the costs must be out-of-pocket. If the improvement adds to the home’s overall value (like a kitchen remodel), only the portion that exceeds the increase in home value may be deductible.
  • Threshold: Medical expenses, including home modifications, must exceed 7.5% of your adjusted gross income (AGI) in the tax year. This means that if your total medical expenses, including renovations, are more than 7.5% of your AGI, you can deduct the excess.

For example, if you add a wheelchair ramp to your home and it costs $5,000, and the installation increases your home’s value by $2,000, you can potentially deduct the difference of $3,000 as a medical expense.

Capital Expense for Business Owners (Section 190 of the IRS Code)

  • Business owners who need to make ADA-compliant renovations can deduct the cost of these modifications as a capital expense. This includes changes made to meet ADA requirements, such as making entrances accessible or installing accessible restrooms.
  • Depreciation: Some ADA improvements may be depreciated over several years, meaning that business owners can spread out the cost deduction across the useful life of the improvements.

2. Tax Credits for Businesses (Small Business Access Credit)

Business owners can take advantage of the Disabled Access Credit, a tax credit designed to help small businesses cover the costs of making their premises ADA-compliant.

Disabled Access Credit (IRS Form 8826)                            

  • Eligibility: The credit is available to businesses that have either gross receipts of $1 million or less in the previous tax year or had 30 or fewer full-time employees during that year.
  • What it Covers: The Disabled Access Credit can be applied to expenses related to removing barriers that prevent access to individuals with disabilities. This includes modifying entrances and exits, installing ramps or lifts, and making restrooms accessible.
  • Amount: The tax credit covers 50% of the eligible expenditures that exceed $250, up to a maximum of $10,250. This means the maximum credit is $5,000 for a tax year.

For example, if a business spends $10,000 on ADA-compliant improvements, they can claim 50% of the amount that exceeds $250, or $4,875. However, if the expenditures exceed $10,250, the maximum credit is capped at $5,000.

Barrier Removal Deduction (Section 190 of the IRS Code)

  • Eligibility: In addition to the Disabled Access Credit, businesses can take a tax deduction of up to $15,000 per year for expenses related to removing physical, structural, or transportation barriers that impede access for people with disabilities.
  • What it Covers: This can include installing ramps, elevators, widening doorways, or creating designated accessible parking spaces.

3. Grants and Financial Assistance for ADA Remodeling

Various grants and financial assistance programs are available to help cover the costs of ADA-compliant renovations, especially for individuals with disabilities and seniors. These programs can provide financial relief beyond tax deductions and credits.

Veteran-Specific Programs

Veterans with disabilities often qualify for financial assistance to make their homes more accessible. Several grant programs are available through the Department of Veterans Affairs (VA).

  • Specially Adapted Housing (SAH) Grant: This grant provides up to $109,986 (for FY 2024) to veterans with service-connected disabilities to build or modify a home to meet their accessibility needs.
  • Special Home Adaptation (SHA) Grant: Veterans may receive up to $22,036 (for FY 2024) for home modifications to help them live independently.
  • Home Improvements and Structural Alterations (HISA) Grant: This program offers veterans up to $6,800 for medically necessary improvements, such as making bathrooms and entrances more accessible.

State and Local Programs

Many states offer grants or low-interest loans for accessibility modifications. Programs can vary by state and locality, but common examples include:

  • Medicaid Waiver Programs: Some states offer Medicaid Home and Community-Based Services (HCBS) waivers, which can help cover the cost of ADA-compliant home modifications.
  • Area Agencies on Aging (AAA): These local organizations often have funding or can connect homeowners with resources to make ADA-compliant modifications.
  • Nonprofit Organizations: Groups like Rebuilding Together and Habitat for Humanity may offer assistance with accessibility renovations for low-income individuals or seniors.

4. Other Financial Considerations

  • Home Equity Loans: If tax deductions or credits don’t cover the full cost of the renovation, homeowners might consider using home equity loans or lines of credit to finance the modifications.
  • Private Insurance: In some cases, private insurance policies may cover part of the cost of accessibility-related renovations if they are deemed medically necessary. It’s important to check with your provider to understand the coverage.

Conclusion

ADA-compliant remodeling projects can qualify for various tax deductions, credits, and financial assistance programs, making these essential renovations more affordable. Whether you’re a homeowner making modifications for medical reasons or a business improving accessibility, understanding your financial options can help offset the costs. By leveraging available tax breaks and grants, you can ensure that your ADA remodeling project is both financially feasible and meets the necessary standards for accessibility.