Are you thinking of renovating a building you own in an historic part of town? Before you start knocking down walls, find out if the building qualifies as an historic structure. It could result in a tax credit reducing your bill by thousands of dollars.
However, be aware that beginning in 2018 recent tax law changes affect the credits for building renovations.
Claiming the credit
While the 10 percent credit for rehabilitating buildings placed in service before 1936 is no longer available for expenses incurred after 2017, you may continue to claim a separate credit that’s equal to 20 percent of qualified expenses for renovating historic structures.
For instance, if you spend $100,000 to update a brownstone with historic character, you may be able to cut $20,000 off the cost. Under the latest tax laws, this credit must be taken ratably over five years. That means a $4,000 credit is claimed each year for five years. So it’ll take a little longer to recoup your costs.
Unlike the rehab credit, it may be easier to qualify for the historic structure credit than you think. For example, there are no age restrictions or wall retention rules. And it doesn’t have to be a place where George Washington slept or an antebellum mansion. But there are two key requirements:
- The building must be listed on the National Register of Historic Places or located in a registered historic district and certified by the Secretary of the Interior. Currently, more than 90,000 buildings are listed.
- The rehabilitation must be certified as retaining the original historic character (but not necessarily the original use) of the building.
Finally, certain complex transitional rules may apply to projects that were underway before 2018. Contact Dye & Whitcomb, Fort Collins CPA’s if you have questions about your renovation projects and whether or not you’re qualified to claim this credit.