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Here’s what historic building owners should know about the rehabilitation tax credit

Photo Credit www.newcollegegroup.com by Nader Morsy

Organizations around the country continue to promote historic buildings and other important heritage sites as May is National Historic Preservation Month. As part of this month, anyone who owns a historic building should remember that the rehabilitation tax credit offers an incentive to renovate and restore old or historic buildings. Tax reform legislation passed in December 2017 changed when the credit is claimed and provides a transition rule.

Here are some things that building owners should know about this 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.
  • Taxpayers 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.

More information:
National Park Service: National Preservation Month
Rehabilitation Tax Credit – Real Estate Tax Tips
Internal Revenue Code Section 47

Issue Number: Tax Reform Tax Tip 2019-64 www.irs.gov

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