Federal historic tax credits are available for the rehabilitation of income-producing, historic buildings. Commercial or residential rental properties are eligible for the 20% federal credit. Additionally, the program requires the owner to hold the building for a minimum of 5 years as an income-producing property. Owner occupied or for sale residential buildings do not qualify.
Applications for federal historic tax credits are reviewed by both the State Historic Preservation Office and the National Park Service for compliance with the Secretary's Standards for Rehabilitation. The federal credits can only be used to offset federal income taxes owed. They are not sellable or transferable.
To qualify, a building must meet the following criteria:
It must be listed individually in the National Register of Historic Places or be a contributing resource to a National Register historic district or a Certified Local historic district.
The federal program requires that the building undergo a substantial rehabilitation defined as necessitating construction expenses that total 100% or more of the adjusted basis of the property.
The state of Missouri offers a tax credit worth 25% of the qualified rehabilitation expenses (QREs). The Missouri historic tax credit can be used for owner-occupied residential or for-sale residential housing or it can be coupled with the federal historic tax credit for use on income producing properties. Missouri does not require that the recipient of Missouri Historical Preservation Tax Credits retain ownership of the building for any minimum period of time.
The Missouri credits can be used several ways. They can:
- 1. Be used to offset Missouri income taxes for the current tax year
- 2. Be carried forward for a period of 10 years
- 3. Be carried back 3 years for a refund of previously paid state income taxes
- 4. Be sold
Before You Start
If you are considering applying for historic tax credits on your rehab project seek the advice of a consultant first. Beginning work before you apply could cost you. The state of Missouri will only issue credits on work performed after an application has been submitted. Removal of significant historic features could result in the disqualification of the project from eligibility.
Maureen McMillan has been assisting rehabbers with the historic tax credit process since 2001.