Want to Save Money on Your Old House? Here’s How
Image Above: One of Bisbee’s MOST MAJESTIC Historic MANSIONS Designed by Henry Trost – CIRCA Old Houses– A key selling point is this property’s potential as an AirBnB or wedding venue, both eligible income-producing uses for both federal and Arizona state historic tax credits.
Yes, the federal government (and some states) will pay you to sensitively rehabilitate your property. How? Through tax credits, a well-established tool for financially incentivizing certain public goods, like protecting our architectural heritage.
What’s a tax credit? A tax credit is an amount that you, a property-owning taxpayer, can subtract from your total amount of income taxes owed. This is than a tax deduction, which reduces a taxpayer’s taxable income and therefore the taxes they owe by a certain percentage, because a tax credit is dollar for dollar.
Here’s an example of the basic math of historic tax credits:
- You spend $100,000 on rehabbing their historic building.
- If you’ve gone through the process of getting approved for a 20% historic tax credit (more details below), the value of your tax credit is $20,000.
- If you usually owe $36,000 in annual income taxes, your accountant can reduce that amount: $36,000 – $20,000 = $16,000.
- If you’ve been withholding or paying estimated taxes throughout the year, you might get a nice refund check!
Of course, everyone’s tax situation is different. Please consult your accountant to understand how the credits specifically benefit you.
Across the country, owners of income-producing properties listed on the National Register of Historic Places can apply for the Federal Historic Rehabilitation Tax Credit,
Let’s look at the kinds of rehab expenses that qualify as “rehabilitation expenditures”. Keep in mind, expenses can include materials, labor and “soft costs” like design and consulting fees.
- Renovating bathrooms & kitchens, including fixtures, tile, plumbing, cabinets, etc.
- Lighting & other functional components of the building
- Removing acoustic tiles from the ceiling
- Restoring or replacing plaster
- Refinishing floors
- Restoring doors & hardware
- Upgrading electrical & other building systems (HVAC, etc.)
- Restoring windows
- Replacing the roof (and adding solar panels, if they aren’t visible from the street!)
- Repairing masonry
Moreover, some states (including Arizona, home of our CIRCA listing case in point) offer additional opportunities to take money off your taxes. To learn about programs in your state, do an online search “[your state] historic tax credits”.
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AUTHOR KATE WOOD grew up criss-crossing the country in the family’s Volkswagen Bus, visiting house museums, battlefields, Main Streets, and national parks. Today, she is an award-winning preservationist, real estate broker and principal of the full-service historic rehabilitation consulting firm, Worth Preserving. Kate believes in the essential value of old-building stewardship to sustain community character. For her, each property is a cause and each client a fellow advocate. She specializes in matching people with properties, skilled contractors, historic tax credits and other benefits to support top-tier rehabilitation projects.
