Federal Rehabilitation Tax Credits
Helping Fight Poverty, Disinvestment and Abandonment
The Federal Historic Rehabilitation Tax Credit has been one of the most powerful and effective tools for spurring rehab for both housing and commercial buildings. On the federal level, the IRS offers a 20% tax credit (not deduction-credit) for the preservation and adaptive reuse of commercial and income-producing buildings. The National Trust for Historic Preservation has long recognized the links between historic preservation, community revitalization, and housing. For example:
Our Position
The National Trust for Historic Preservation supports the creation and maintenance of Federal and State rehabilitation tax credits for restoring older and historic structures, particularly as they relate to preserving community character, affordable housing, and central business districts and Main Street economic development activity. The National Trust also supports expansion of these credits as they relate to alleviating urban flight, property abandonment, and economically distressed neighborhoods and as a tool for sustainable development.
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- America’s older and historic neighborhoods already house record numbers of low- and moderate-income residents. Thirty-two percent of households below the poverty line and 34 percent of renters whose household income is less than $20,000 per year live in older and historic homes.
- Of the nation’s over 12,000 historic districts comprising over a million contributing structures, 60 percent overlap census tracts in which the poverty rate is 20 percent or greater. In many parts of the country where abandoned buildings are located in some of the nation’s most disinvested communities, there is a need for incentives to create housing and stabilize neighborhoods.
- Lastly, vacant or underutilized historic structures that were not built for housing, but no longer serve their intended purpose -- such as warehouses, factories, mills, and department stores -- can be adaptively re-used as catalysts for attracting new investment in the neighborhoods that need it most. So many of these historic and older buildings are located near existing infrastructure, transportation hubs, schools, and neighborhood-serving retail.
Current Federal Law
Federal law provides a federal income tax credit equal to 20% of the cost of rehabilitating a historic building for commercial use. To qualify for the credit, the property must be a certified historic structure—that is, on the National Register of Historic Places or contributing to a registered historic district. (Non-historic buildings built before 1936 qualify for a 10% tax credit.) At present, individuals rehabilitating a historic property for their primary residence do not qualify for this federal tax credit. For more information and background on current law visit the National Park Service website.
Update: Administering the Federal Rehabilitation Tax Credit
In 2005, the National Park System Advisory Board made recommendations on improving the administration of the federal rehabilitation tax credit program to make it more user-friendly and to clarify the process for using the credit more effectively. These recommendations, which included input from the National Trust, were adopted by the Advisory Board on September 15, 2006. The committee's report, "Federal Historic Rehabilitation Tax Credit Program: Recommendations for Making a Good Program Better," can be downloaded at http://www.cr.nps.gov/hps/tps/tax/committee.htm.
