The Basic Tax and Regulatory Rules Governing Historic Rehabilitation Tax Credits

April 20, 2012 — 1,284 views  

When you own or manage a property that's relatively old, it can be expensive to make repairs and renovate existing structures. Fortunately, the federal government has a vested interest in preserving older buildings that have some historical value. It's therefore possible to offset the costs associated with such projects thanks to historic rehabilitation tax credits.

The historic rehabilitation tax rules are relatively straightforward. First, realize the only costs that can be defrayed by this program are those related to renovation, restoration or reconstruction. Enlargements, additions and new construction won't make a project eligible for financial assistance.

The benefit of historic rehabilitation tax credits is the amount of money you can deduct from yearly taxes. Take off 10 percent of the costs associated with renovating or restoring a building erected before 1936. If a structure has been declared a certified historic structure by the IRS in the past, the credit is 20 percent of restoration costs.

However, if a property has been damaged by a natural disaster, the benefits increase. Pre-1936 structures can have 13 percent of restoration costs subtracted from yearly taxes, while historical building owners will be eligible to deduct 26 percent of its reconstruction fees.