Rehabilitation Tax Credit

We sure do love the charming historic downtown area in our city. We love it so much, in fact, that when a certified historic building with a bunch of cute shops in it went on the market, we were thrilled to buy it. But even though the building is beautiful and just chock-full of charm and character, maintaining and repairing it can be...pricey. Just today, we had a contractor come out and look at our basement and give us some bad news: our foundation pillars are crumbling and need to be replaced, stat. We’ve also got water coming into the basement from somewhere, and we’re going to need to fix that, too.

Unfortunately, renovations like this are expensive, and insurance will only cover so much. Fortunately, the Rehabilitation Tax Credit exists to help alleviate some of the financial burden. The “Rehabilitation Tax Credit” is a tax credit we can take if we do qualifying rehab work on a qualifying structure. What’s a qualifying structure? It’s a certified historic property that is not tax-exempt and is being used to generate a profit. We can take up to 20% of the cost of our reno and apply for a tax credit that will be divided up and applied to our federal taxes for the next five years. And, considering the pillars alone are going to cost thousands of dollars to replace, that’s a pretty big deal.

It’s not only certified historic business buildings that qualify for this credit. If our non-tax-exempt business was damaged in a hurricane between 2005 and 2009 and is located in a certain area, we can claim a credit of either 13% or 26%, depending. If we meet either (or both) of these criteria—we have a certified historic building we use for business, or we have a hurricane-damaged business in the GO-Zone—then we should most def consult with a tax accountant and see if the Rehabilitation Tax Credit is right for us.