Tax Credit for improvement for Disabled Access Credit 8826

1 Reply

Hello fellow BP forum,

I recently had to make improvements to my commercial rental property due to ADA requirements on the property.  We  had handicap signs and access lines painted to "removed barriers for access".  Spent a couple of thousand dollars for the repairs.  I told the tenant I will pay for the cost of the repairs and reimburse him.

Now for the tax question: 

Under IRS form 8826 and CA FTB form 3548 there is a tax credit available for these cost but available to small business.  Do I as a landlord qualify as a small biz for the tax credit for both irs and cali? I claim the income under schedule E. 

I'm thinking maybe I can claim this because I meet under $1M amount and all I need to do is claim using the form to be eligible. 

Irs and FTB definition:

Eligible Small Business For purposes of the credit, an eligible small business is any business or person that: 

• Had gross receipts (including that of any predecessor) for the preceding tax year that did not exceed $1 million or had no more than 30 full-time employees during the preceding tax year, and 

Elects (by filing Form 8826) to claim the disabled access credit for the tax year. 

For purposes of the definition: • Gross receipts are reduced by returns and allowances made during the tax year, • An employee is considered full time if employed at least 30 hours per week for 20 or more calendar weeks in the tax year, and • All members of the same controlled group and all persons under common control generally are considered to be one person—see section 44(d)(2).

@Dave K.

Of course, you qualify. This is one of the credit that federal as well as state extended to RE dealers and investors. 

The maximum credit will be limited to $5,000 a year. You might be able to more deduct the expense in the same year as well under different code( sec 190) see below.

Remember, expenditures unnecessary for compliance with the Americans With Disabilities Act of 1990 (ADA) are not eligible.

If you spent more than 5k in both removing the barriers and making changes for the compliance,  you can deduct other expenses up to 15k rather than capitalizing and depreciating it. 

This is a very simple example.: 

If you incurred $22,000 of expenditures to remove architectural barriers, you can claim a $5,000, [($10,250 − $250) × 50%]. On top of that, $15,000 of the remaining $17,000 ($22,000 − $5,000*) balance of the expenditures can be deducted. Expenditures of $2,000 [$22,000 − ($5,000 + $15,000)] are capitalized and depreciated.

*The $5,000 cannot be deducted as you have claimed a credit for it. 

CA does have the credit, but it is limited to $125 a year, and CA allows carryover.  

Hope that helps.