Historic Tax Credits
Historic Tax Credits: Preserving the Past, Building the Future
Owning a property in a historic preservation district or listed on the National Register of Historic Places comes with more than charm and character—it also offers significant financial incentives through historic tax credits. These programs encourage the rehabilitation and preservation of historic structures, making it easier for property owners to invest in their restoration while preserving our shared architectural heritage.
With the potential to receive up to 30% back on qualified improvement costs, historic tax credits are a game-changer for residential and commercial property owners. Let’s explore how these credits work and how you can use them.
For Commercial Income-Producing Properties
If you own or plan to invest in a commercial property with historic significance, you could qualify for both state and federal tax credits, offering a combined benefit of up to 40% of Qualified Rehabilitation Expenses (QREs). Here’s what you need to know:
Funding Sources: State and federal funds available.
Eligibility: Income-producing properties (e.g., retail, office space, or rental units).
Ownership Requirement: Five years after the credit, before a sale.
Maximum Credit: Vary by state. Kentucky has a cap at $10M.
Credit Sale: Federal tax credits can be sold to banks for immediate financial gain.
For Residential Owner-Occupied Properties
Historic tax credits aren’t just for investors—homeowners can benefit significantly when restoring their historic residences.
Here’s how:
Credit Amount: Up to 30% back on QREs, capped at $120,000 per project.
Investment Range: Projects that range from $20,000 to $400,000 in eligible expenses.
Flexibility: No ownership time requirements before a sale.
State-Specific Program: Consult your local historic preservation office for guidance.
Residential Investors: Investors renovinting residential properties also qualify.
The Application Process
Both residential and commercial projects follow a structured three-part application process:
Part 1 - Evaluation of Significance:
Confirms that the property qualifies as a certified historic structure.
Part 2 - Description of Rehabilitation:
Details the proposed work and ensures it aligns with preservation standards.
Part 3 - Certification of Completed Work:
Verifies that the project was completed as planned and meets all requirements.
Applications should be submitted before work begins, and photo documentation is required. Some states allow after-the-fact submissions. Deadlines vary by state but typically fall in late spring each year.
Why Consider Historic Tax Credits?
Beyond the financial savings, utilizing these credits contributes to community revitalization by preserving America’s rich architectural history. Restored properties often see increased market value while maintaining their unique character—a win-win for owners and neighborhoods alike.
FAQs About Historic Tax Credits
What expenses qualify?
Qualified Rehabilitation Expenses include structural repairs, restoration of original features, roofing, plumbing, electrical upgrades, kitchen and bath renovations, and more. Cosmetic changes or new additions generally do not qualify.
How long does it take to get approved?
The timeline varies, but it can take several months from submission to approval. Early consultation with your State Historic Preservation Office (SHPO) can help streamline the process.
Can I sell my property after claiming credits?
There is no holding period requirement for residential properties. However, commercial properties must remain in the same ownership for five years.
Whether restoring a Victorian home in Old Louisville or converting a historic warehouse into office space, historic tax credits make preserving history while building your future possible.
Ready to explore your options?
Contact me today—I’ll guide you through every step of the process!