As January ends, there is one thing we can always count on — the delivery of our 1099s and W2s, letting us know to the penny how much money we made last year and how much tax we’ve paid. There are ways to reduce those taxes beyond normal deductions, however, and some of them have to do with historic houses and historic districts.
Tax incentives are available at the federal level, the state level and the local level for those renovating, restoring or converting historic buildings.
According to The National Trust for Historic Preservation, 38 out of 50 states offer tax credits or incentives for those who live in, are moving to, or have businesses in historic buildings. The Trust offers a guide to which states offer what, but, generally, loans and grants are offered for restoration, renovation, or other rehabilitation.
In Maryland, “Homeowners have the opportunity to earn a state income tax credit equal to 20 percent of qualified rehabilitation expenditures.”
This means that if you spend $5,000 on a qualified restoration project on your historic home, you could receive an income tax credit of $1,000. A “qualified” project is one that contributes to or maintains the historic character of the house. A list of potential qualifying projects can be found at the Maryland Historic Trust tax credit site.
The first step that must be taken before applying for the credit, however, or even before determining if your project is a qualified project, is to determine if your home is what is called a “certified historic structure.”
State of Maryland law defines it as a property located in a national or local historic district, or one that has significance to an historic area, or that is, itself, designated as an historic place. If your property fits into that definition, then your first step is to confirm that certification by filing your renovation project with the MHT.
Downloadable application forms at the tax credit site will take you through the three steps you need to climb in order to get the credit. The first step certifies that your home is, indeed, a “certified historic structure.” The second step asks you to describe your project and verifies that it meets the “Standards for Rehabilitation.” And the final step is certification of completion which allows you to claim the tax credit.
For other possible tax credits, such as local options, you’ll want to check your local government website to see what is offered. The city of Cumberland, for example, offers a 10% reduction in property tax with a minimum expenditure of $5,000 on a renovation project on an historic property.
For commercial projects, mainstreet.org notes that federal loans up to 30% are being offered through 2025 under the Historic Tax Credit Growth and Opportunity Act. The National Park Service’s delineates tax incentives for restoring historic properties at its website.