If you’re applying or would like to for tax credits you must avoid altering features that characterize a historic property.
To qualify for this program, your building must be listed individually in the National Register of Historic Places or it must be located in a registered historic district and certified by the National Park Service as contributing to the historic significance of that district.
A tax credit differs from an income tax deduction. An income tax deduction lowers the amount of income subject to taxation. A tax credit, however, lowers the amount of tax owed. You will want to consult with an professional historic rehab tax credit consultant.
20% Tax Credit
A 20% income tax credit is available for the rehabilitation of historic, income-producing buildings that are determined by the Secretary of the Interior, through the National Park Service, to be “certified historic structures.” The State Historic Preservation Offices and the National Park Service review the rehabilitation work to ensure that it complies with the Secretary’s Standards for Rehabilitation (www.nps.gov/tps/standards/rehabilitation). The Internal Revenue Service defines qualified rehabilitation expenses on which the credit may be taken. Owner-occupied residential properties do not qualify for the federal rehabilitation tax credit. Learn more about this credit before you apply log onto: www.nps.gov/tps/tax-incentives/before-you-apply.
Each year, Technical Preservation Services approves approximately 1000 projects, leveraging nearly $4 billion annually in private investment in the rehabilitation of historic buildings across the country.
10% Tax Credit
The 10% tax credit is available for the rehabilitation of non-historic buildings placed in service before 1936. The building must be rehabilitated for non-residential use. In order to qualify for the tax credit, the rehabilitation must meet three criteria: at least 50% of the existing external walls must remain in place as external walls, at least 75% of the existing external walls must remain in place as either external or internal walls, or at least 75% of the internal structural framework must remain in place. There is no formal review process for rehabilitations of non-historic buildings. Learn more about this credit in Historic Preservation Tax Incentives.
According to Novogradac an resource center on historic issues and topics, they say that the federal historic tax credit (HTC) program has a significant positive effect on the economy while more than paying for itself, according to the fiscal year (FY) 2012 update of research released annually by Rutgers University and the National Park Service. The Annual Report on the Economic Impact of the Federal Historic Tax Credit for FY 2012 reveals that the federal HTC has created 2.3 million jobs, attracted $106 billion in private investment and restored 38,700 historic buildings since its inception more than 35 years ago. In addition, the report shows that the HTC yields a net benefit to the Treasury Department; the HTC has helped generate nearly $26 billion in federal taxes while costing only $20.5 billion in credits allocated.
Rudy Nino is a renovation contractor and advisor with the Blanco Historic Preservation Commission.