Consult Peter J. Scalise’s Specialty Tax Incentives Q&A Session on TaxConnections

I am a property owner in the process of rehabilitating a few older commercial buildings. My Accountant informed me that there are preservation tax credits that I can apply to reduce my rehabilitation costs but I am still waiting on information from him. Is this true?

Yes, your accountant is correct.

As a synopsis, there are two categories of federal-level preservation tax credits as outlined below:

• Pursuant to I.R.C. § 47(a)(1), the Rehabilitation Tax Credit offers a 10 percent credit available for the rehabilitation of non-historic buildings with an additional requirement that the building must have been originally constructed before 1936; or

• Pursuant to I.R.C. § 47(a)(2), the Historic Tax Credit offers a 20 percent credit available for the rehabilitation of a Certified Historic Structure (e.g., one listed on the National Register of Historic Places or located in a Registered Historic District and determined to be of significance to the Historical District).

These preservation tax incentives can significantly reduce a property owner’s perceived costs for the renovation of an older building and should certainly be considered when planning a renovation project. In addition, it should be duly noted that most states now offer preservation based tax incentives at the state level (e.g., such as ME, NH, VT, MA, RI, CT, NY, PA, DE, MD, WV, VA, NC, SC, GA, FL, MS, LA, AR, MO, IA, MN, WI, IN, KY, MI, OH, ND, KS, OK, CO, NM, UT & MT with several remaining states introducing legislation that would create a similar program in NJ, AL, IL, and TX) which can be utilized in conjunction with the federal-level incentives to further reduce the expenditures of a property owner’s renovation.

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