Historic Tax Credits
Historic Building Rehabilitation
The Federal and State Historic Tax Incentive programs encourage investment in the rehabilitation and re-use of historic buildings. Tax credits on qualified expenditures can sometimes make the difference in deciding to undertake renovation of an investment property.
What is a Tax Credit?
A Tax Credit is a direct, dollar for dollar reduction in the amount of money a taxpayer must pay in taxes for a given year. The amount of the tax credit ultimately awarded is based on the qualified cost of renovating and restoring a historic property, which qualifying costs do not include acquisition, additions, or landscaping. Applications must be filed with the state and/or the U.S. Department of the Interior prior to the completion of the project and approved in order the receive the credits.
What are the 2 Historic Rehabilitation Tax Programs?
Federal 20% Historic Rehabilitation Tax Credit
- Credit can be used in a single year or carried forward up to 20 years and back 1 year.
- Must be an income producing property.
- Building must be certified as a historic structure by the National Park Service.
- Building must be considered a contributing element within a National Historic District.
- Must have been built before the end of the period of significance for particular district.
- Must be still recognized as historic.
Credit Cap: None - Rehabilitation expenditures must exceed the adjusted basis of the building (adjusted basis is typically purchase price minus value of land)
State of Texas 20% Commercial Rehabilitation Tax Credit
The Texas legislature approved the extension of the state’s historic tax credits to January 1, 2022.
- Credit can be used in a single year or carried forward up to 5 years and back 1 year.
- Must be an income producing property.
- Building must be certified as a historic structure by the Division of Historic Preservation.
- Building must be at least 50 years old.
- Located within a Downtown Development District or a Certified Cultural District.
- Must be still recognized as historic.
- Credit Cap: $5 million per taxpayer in a particular district.
- Rehabilitation expenditures must exceed $10,000.