Does anyone have any experience with with the federal historic home repair 20 percent tax credit? My wife and I are thinking about buying two somewhat derelict homes that are next to each other. One would be operated full time as a bed and breakfast. We were planning to live in the other, but might nevertheless let rooms or allow it to be used for special occasions. My understanding is that the federal tax credit is only for homes that are unoccupied. Is this true for a home that is occupied but used for a bed and breakfast?
In researching this I found that our state also has a 25 percent tax credit, so it would be possible for 45 percent of our repair costs to be covered by tax credits (both houses are in a National Register district and are specifically listed; in fact, the photo used to illustrate the district is of the two houses). We aren’t buying to resell, but is there any limit on reselling? Likewise, assuming we can’t live in the houses at the point when we receive the credits, at what point could we decide to move into one of them?
Federal Historic tax credits are only for income producing properties, see https://www.nps.gov/TPS/tax-incentives.htm
(you should start here)however, a Bed and Breakfast would qualify. An owner occupied residence does not qualify. And the credit is only for eligible expenses, which means those expenses that help to preserve the historic integrity of the building. For example, painting a Victorian home in appropriate colors would be a qualifying expense, adding an elevator would not be. In addition, the Federal Credit is only a tax credit that can be carried over a period of years. You must sure that you will have enough tax burden to offset the credit for this to work for you.
Determining what is an eligible expense is a long and involved process, but it is doable, if you start early in the planning process and work with your state Historic Preservation Office (SHPO).
State Credits all work differently. What state are you in? In some states the credit can be use for non-income producing properties (ie. private homes) and in some states it is a refundable credit, meaning you will get a check a some point down the road. Check with your state Historic Preservation Office (SHPO) to get started. Most states limit the total amount of credits in any given fiscal year, so you may have to wait a couple years to be able to use the credit. Be aware that everything, both the federal and state credit will go through the SHPO office so they will be involved which ever credit you choose to use.
The other thing to be aware of is that Historic Preservation Tax Credits are very much up in the air right now, Check with your SHPO and see what they are doing right now and what they expect in the future.
@lololu I live in Mississippi, which has a 25 percent credit for income-producing properties, and the building can serve as a residence.
Both of these houses underwent a major remodel in 1917, and my intention is to remain as true to that remodel as possible. Both houses have approximately 600 sq. ft. servants quarters that have been converted to storage rooms. They still have fireplaces in the center of the room. I’d like to convert these back to small apartments or bedrooms that could be rented, but would need to add plumbing; hopefully they will allow that. I’ve seen projects where they allow the inclusion of modern facilities to make a historic structure usable.
Fortunately, the house that needs the most work is the one we won’t be living in, so it will be eligible for both the state and federal credit. I think I’ll check with our department of archives and history to see if they provide on-site consultations. I know they will be glad to see these houses being rescued. Right now I’m just in the offer stage. The bank has been sitting on these a while, but who is to know what they will do.
It has been some time since I looked at this, but doesn’t the property have to be on the federal register? Also, I think there were requirements about the work having to be done to meet certain historical preservation standards.
I would find someone in your area who’s been through that rodeo before and learn a lot more about process and approvals.
(My home is locally landmarked-- and the last time we had the house painted it was a 20+page submission for approval complete with paint chips and call outs for each color.)
It looks like Mississippi has quite a good program. Starting with your SHPO is the most important thing. They are the ones who will make decisions in the end and they are the ones who will give you the best advice. You can talk to neighbors,etc. but for the straight and correct answers go to your SHPO. There is a lot, a lot, a lot, a lot of misinformation out there about historic preservation and many people get scared away. This is a doable thing, and a good thing, but it is far easier if you work with the right information from the beginning.
Again I caution you that these programs are most likely in flux under the current administration, so it is doubly important that you talk to your SHPO people before starting anything.