Tax breaks save historic old houses

By The Old House Web

Old houses cost more to heat and cool. Their exteriors require continual maintenance, and they must be protected from termites and other pests. But you're in luck because Uncle Sam also loves old houses. He might even be willing to give you a break on your taxes to keep yours in good condition.

Which old homes get tax breaks?

Over one million properties in the U.S. qualify as historic homes, and about 30,000 are added to that list each year. Old houses with historic value are listed on the National Register of Historic Homes, which is administered by the United States National Park Service, or NPS. To get your home listed, contact your State Historic Preservation Office. or SHPO. The application process takes some time; expect to wait 90 days or longer.

In general, homes must be at least 50 years old, located in designated historic districts, or "very important" to be considered, and their appearance should be largely unchanged. Registered homes should have some historical significance, but the term "historical significance" is pretty subjective. For example, in Reno, Nevada, the Alpha Tau Omega fraternity house has made the list, due to its "social history."

To get federal tax credits, the home can't function exclusively as a private residence. Some or all of it must generate income -- as a retail outlet, rental or office. Private homes, however, can qualify for state and local tax incentives and federal deductions for conservation easements.

Tax breaks for old houses

Tax credits -- Qualifying historic home renovations could get you federal, state and local tax credits. In Wisconsin, for example, you could claim a 20-percent credit on your federal taxes, and a 25-percent credit against your state taxes. That's a refund of nearly half of your improvement costs!

Easements -- These are available to private homes and commercial properties. Conservation easements protect a home's valuable historic and architectural heritage by restricting the right to change its appearance. You deduct the value of the easement from your taxable income in the year of the grant. The easement's value equals the reduction in property value resulting from restrictions on future development, including a building's height, density and use.

Tax deductions and reductions -- Many states offer tax breaks, like California's Mills Act, which grants significant property tax discounts for the preservation of historic private residences.

Historic home improvements

Listing your home on the National Registry does not obligate you in any way or restrict what you can do with your property. However, before undertaking a renovation, the Park Service recommends that you check with your SHPO to make sure state or local preservation laws do not impact your project.

To receive federal grants or tax credits for the preservation of your old house, you can't renovate or improve it indiscriminately. Home improvement projects must be submitted in advance to the Advisory Council on Historic Preservation, which will make comments and recommendations to the NPS. The whole application process usually takes less than three weeks.

Selecting a contractor

Many home improvement contractors specialize in historic home renovation or preservation. They'll have a better understanding of what's allowed in your area, and they can tell you which of your home's features confer historic significance and should not be changed. A knowledgeable contractor can significantly increase your chances of project approval.

 

 



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