Information on tax credits for historic rehabilitation
Did you know that you could receive a credit on your income taxes if you rehabilitate a historic building? If your rehabilitation meets certain requirements, you could claim 20 percent of your qualified rehabilitation expenses as a credit on your federal income taxes, and you could claim 25 percent of your qualified rehabilitation expenses as a credit on your state income taxes.
What buildings are eligible for the rehabilitation tax credit program?
Buildings which are individually listed in the National Register of Historic Places and the Virginia Landmarks Register or are certified as contributing to a historic district that is listed on these registers are eligible for the program. In order to claim the federal tax credit, the owner must use the building for income-producing purposes. The state credit is available for owner-occupied as well as income-producing properties.
What requirements do I have to meet in order to claim the credits?
The application for the credits is a three-step process.
In Part 1, the building is certified as historic.
In Part 2, the applicant documents the existing features of the building using “before” pictures, and describes how they will be treated in the rehabilitation.
In Part 3, the applicant documents how the rehabilitation was actually performed using “after” pictures. In order to receive the credits, all work, including work done on the interior of the building, must be performed in accordance with The Secretary of the Interior’s Standards of Rehabilitation.
How extensive does the rehabilitation have to be?
For the federal program, the cost of the rehabilitation must exceed the owner’s adjusted basis in the building, or $5,000, whichever is greater.
For the state program:
Income-producing properties: The cost of the rehabilitation must be at least 50 percent of the assessed value of the building in the year preceding the rehabilitation.
Owner-occupied properties: For rehabilitations completed after January 1,2001, the cost of the rehabilitation must be at least 25 percent of the assessed value of the building in the year preceding the rehabilitation.
How much is the credit?
For the federal program, the credit is 20 percent of the eligible rehabilitation expenses. For the state program, the credit is 25 percent of the eligible rehabilitation expenses.
What is an “eligible rehabilitation expense?”
Any expense incurred in the rehabilitation that is capital in nature and depreciable. Generally speaking, this includes any work done on the historic structure itself. It does not include acquisition costs, enlargement costs, or new building construction costs.
Do I have to complete the rehabilitation in a particular period of time?
No, but you do have to reach the relevant spending threshold within a particular period of time. In most cases, this period is 24 months. For phased rehabilitations, the time period is 60 months.
This information is provided by the Virginia Department of Historic Resources. For more information on these programs, contact:
Tax Credit Program
Virginia Department of Historic Resources
2801 Kensington Avenue
Richmond, Virginia 23221