What expense category is Architectural Barrier Removal ?

Making a business accessible to all customers and employees, including individuals with disabilities or the elderly, is not just a good business practice—it also comes with a specific tax benefit from the IRS. Typically, costs that improve a business asset must be capitalized and written off over a period of many years through depreciation. However, a special provision in the tax code allows businesses to deduct a significant portion of accessibility-related costs in the same year they are incurred.

This guide explains how to classify architectural barrier removal expenses according to the IRS correctly, details important tax rules and limits, and demonstrates how a modern expense management system can help track these project costs for maximum tax compliance and benefit.

The Architectural Barrier Removal Expense Category

The cost of a significant improvement to a business asset is typically a capital expense. However, Section 190 of the Internal Revenue Code allows a business to elect to treat "qualified barrier removal expenses" as a current, deductible business expense.

This election applies to costs you pay or incur to make a facility or a public transportation vehicle that you own or lease for your business more accessible and usable.

• The IRS defines a facility as all or any part of a building, structure, equipment, road, walk, or parking lot.
• A public transportation vehicle is a vehicle, such as a bus or van, that provides public transportation services to the general public.

It is critical to understand that this special deduction is specifically for modifying existing assets. As stated in IRS Publication 535, it does not apply to expenses for the complete renovation or new construction of a facility or vehicle.

Important Considerations When Classifying Barrier Removal Expenses

Before making the election to deduct these costs, accountants and business owners must be aware of several key IRS rules and limitations.

The Annual Deduction Limit

According to IRS Publication 535, the maximum amount you can elect to deduct for qualified barrier removal expenses for any single tax year is $15,000.

Handling Costs Above the Limit

If your total barrier removal costs for the year exceed $15,000, you cannot deduct the excess amount. Instead, you must capitalize the amount over $15,000. This means you will add the excess cost to the basis of the property and recover it over time through depreciation, following the rules outlined in IRS Publication 946 for the Modified Accelerated Cost Recovery System (MACRS).

The Disabled Access Credit (Form 8826)

In addition to the Section 190 deduction, IRS Publication 535 notes that an "eligible small business" may be able to claim the Disabled Access Credit on Form 8826 for expenses paid to provide access to persons with disabilities. You must decide which tax benefit is more advantageous, as you cannot claim both the deduction and the credit for the exact same expenses. If you claim the credit, you must reduce the amount of your expense deduction or your capitalized basis by the amount of the credit claimed.

Meeting Official Qualification Standards

To be deductible, the barrier removal must meet the specific guidelines and requirements issued under the Americans with Disabilities Act (ADA) of 1990. It is essential to ensure any work performed is in compliance with these standards.

Examples of Deductible Architectural Barrier Removal Expenses

IRS Publication 535 provides a list of expenses that may qualify for this deduction. These include, but are not limited to, costs for:

• Building ramps.
• Widening doorways or hallways.
• Modifying or installing accessible restrooms, water fountains, and public telephones.
• Creating accessible parking spaces.
• Installing grab bars, railings, or curb cuts.
• Adding warning signals, such as visual alarms, for individuals with hearing impairments.
• Installing Braille signage for individuals with visual impairments.

Tax and Recordkeeping Requirements

To ensure compliance and secure your deduction, you must follow specific tax reporting and recordkeeping procedures.

How to Elect and Report the Deduction

You can make the election to deduct up to $15,000 of these expenses simply by claiming them on your income tax return for the tax year the expenses were paid or incurred. For sole proprietors, this is typically done on Schedule C (Form 1040) by listing it as a separate "Other Expense."

The election must be made on a timely filed return (including extensions). IRS Publication 535 clarifies that if you file on time without making the election, you can still make it by filing an amended return within six months of the due date of the original return (excluding extensions).

What Records to Keep

As with all business deductions, you cannot deduct amounts you simply estimate. You must have adequate records to prove the expense. According to IRS guidelines, your supporting documents should show:

• The payee (the contractor or vendor).
• The amount paid.
• Proof of payment (canceled check, credit card statement).
• The date the expense was incurred.
• A description of the work performed that demonstrates it involved removing a specific architectural barrier.

Keep all invoices, contracts, and proof of payment organized and stored safely.

How Fyle Can Automate Expense Tracking for Barrier Removal Projects

Managing the finances for a renovation or construction project involves tracking numerous invoices, contractor payments, and material costs. Fyle helps you capture, code, and control these expenses from start to finish.

When you pay a contractor for installing a ramp or modifying a restroom, the expense can be instantly coded to a specific "Project," such as "ADA Compliance Upgrade." This allows for granular, real-time tracking of all costs associated with the barrier removal, making it easy to monitor spending against the $15,000 IRS deduction limit. 

You can centralize all project documentation by having contractors email invoices directly to Fyle, which automatically creates a digital, audit-ready record for every expense.

Fyle’s direct, two-way integration with accounting software, such as NetSuite, Sage Intacct, QuickBooks, and Xero, ensures that these project costs are coded correctly from the start. Accountants can easily map expenses to the proper general ledger accounts to automate adherence to tax rules. 

For example, the first $15,000 in barrier removal costs can be synced to a specific "Barrier Removal Expense" account for the current-year deduction, while any excess can be seamlessly directed to the appropriate fixed asset account for capitalization and depreciation.