Taxes and Historic Buildings
May is National Historic Preservation Month, and plenty of organizations around the U.S. are promoting historic buildings and other important heritage sites around the country.
In light of the month’s significance, we thought it would be helpful to know just what incentives the rehabilitation tax credit offers for owners wishing to renovate or restore old or historic buildings.
True, the tax credit itself isn’t new. But some conditions for qualifying for the credit—such as when the credit is claimed—were changed with the passage of the tax reform legislation in late 2017.
So here are some important points to keep in mind about the rehabilitation tax credit:
- The credit is 20 percent of the taxpayer’s qualifying costs for rehabilitating a building.
- The credit doesn’t apply to the money spent on buying the structure.
- The legislation now requires taxpayers take the 20 percent credit spread out over five years beginning in the year they placed the building into service.
- The law eliminates the 10 percent rehabilitation credit for pre-1936 buildings.
- A transition rule provides relief to owners of either a certified historic structure or a pre-1936 building by allowing owners to use the prior law if the project meets these conditions:
- The taxpayer owned or leased the building on January 1, 2018, and the taxpayer continues to own or lease the building after that date.
- The 24- or 60-month period selected by the taxpayer for the substantial rehabilitation test begins by June 20, 2018.
Use Form 3468, Investment Credit, to claim the rehabilitation tax credit and a variety of other investment credits. Form 3468 instructions have detailed requirements for completing the form.
Other sources for more information include Rehabilitation Tax Credit - Real Estate Tax Tips and
Internal Revenue Code Section 47.