Historic Homes and Tax Breaks
by Francine L. Huff
Old House Web Columnist
Owning a historic home can be rewarding but costly. To ease some of the financial burden, you may be able to take a tax deduction or be eligible for a tax credit for rehabilitating historic buildings. Before you start celebrating, make sure you understand the rules for these federal tax programs.
Preservation Easement Tax Break
Qualifying for a preservation easement could give you a tax deduction that could equal up to 30% of your adjusted gross income, based upon the value of the property, according to the National Park Service. But qualifying for this tax program isn't as simple as it sounds. You'll need to enter an agreement with a nonprofit or historic trust to give it control of the physical features and uses for your home.
The upside of this is that you as the property owner will still own the home, and will be able to take a charitable gift tax deduction that can be spread out over five years. Your heirs also may qualify for reduced estate taxes. The downside is that any home improvements made by you or future owners will have to be approved by the group that holds the easement.
Tax Credit for Rehabilitation Work
The Federal Historic Preservation Tax Incentive Program offers a tax credit of 20% for rehabilitated historic properties that produce income. Generally, the credit is used for commercial, industrial, and rental housing--not private residences. But you may be able to qualify for funds for the part of your home that is used for business or as a rental unit.
Expect to fill out lots of paperwork and do your homework to determine if your historic home qualifies for either of these tax programs. Also check with your state and local governments to find out if you qualify for reduced property taxes or other incentives available to historic homeowners in your area.
National Park Service
About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.