Historic Tax Credits Can Increase Your ROI

[Julio Gonzalez]

Preserving historic buildings plays a big part in the cultural and architectural heritage of communities. The government encourages property developers and owners to invest in these types of projects by offering numerous tax credits and incentives. However, these programs can be challenging to navigate.

Understanding and taking advantage of the variety of tax credits boosts the return on your property and allows you to be part of the move to conserve our nation’s historic treasures.

What is a historic tax credit?

The historic preservation tax credits are federal tax credits that encourage property developers and owners to rehabilitate and preserve historic and non-historic buildings used in trade or business or held for the production of income. This lowers the overall cost of the project by lowering the tax owed dollar for dollar.

How to qualify for the historic tax credit? Your building must meet the following requirements:

• Must be listed in the National Register of Historic Places or be located within a registered historic district.
• Must be used for income-producing purposes, such as rental residential or non-residential uses (i.e. not a personal residence)
• Must undergo a substantial rehabilitation that meets the Secretary of the Interior’s Standards for Rehabilitation

How does this tax credit increase your ROI?

• Identifying tax credits helps reduce the costs of the project. This reduces the capital required and increases the return on the investment.
• In addition to the immediate tax savings, these tax credits can have a long-term impact on the cash flows and property values. It can increase the appeal, which in turn increases the rental income

While you can look into the historic tax credits alone, I would strongly recommend working with your CPA or a historic tax credit consultant as they are experts in the field and will likely benefit you and your project in the long run. Experts should be able to identify and evaluate potential projects, streamline the tax credit application process, combine tax credits and incentives for maximum savings and navigate the design review and approvals for historic properties.

Are you currently utilizing historic tax credits?