Historic Tax Credit Calculations

[J.R. Coffin]

Looking at two properties up in Newburgh, NY this week - both 3 families that should cashflow easily. However one is about 100k higher in price with turnkey finishes and grandfathered in historic tax credit. Does any have any rule of thumb figures that could help me analyze this property? Should I just reduce the repair cost by 20% over the life of building?

[Bryan Mills]

@Jillian R. Wiedenmayer

There are several important questions regarding the historic tax credit - Do you know the amount of qualified rehabilitation expenditures (QREs) for historic tax credit purposes? Is it federal or state HTCs? Has the owner competed Part I, Part II and/or Part III of the federal HTC application? Has the property been placed in service yet and the HTCs already been claimed? Is it owned by an individual or an entity?

The grandfathered federal HTC is 20% of QREs, so you could claim on your tax return for this year (assuming you purchase and place in surface this year), and assuming you have the income to be able to use the credits. People typically don’t pay full price for the credits, you would buy at a discount to the face value.