Your property restoration project could be eligible for tax credits. A little help from an expert can save a lot of money.
A 20% income tax credit for Federal and Oklahoma taxes is available for rehabilitating historic, income-producing buildings that the National Park Service determines as “certified historic structures.”
Most property owners can’t use the tax credits. At Oak Hills, Securities our clients can use the Federal and Oklahoma tax credits, our specialized knowledge to “syndicate” the credits through the appropriate legal structures. As such, OHS locates taxpayers to purchase your federal and state tax credits.
1. Potential Historic Tax Credit Properties
A “historical” property needs three attributes: sufficient age (50-plus years), physical integrity (ability to be rehabilitated) and historical significance. The property must be income-producing. Thus, personal residences aren’t eligible.
2. “Substantial Rehabilitation Test”
The rehabilitation cost must exceed the pre-rehabilitation building basis and must occur within two-five years for a multi-phase project. The project’s cost must exceed the greater of $5,000 or the building’s adjusted basis.
Not all project expenses qualify for the tax credit, such as landscaping.
3. Outside Investor
Most individuals can’t use the federal tax credits because of insufficient income or passive activity loss rules, but OHS can syndicate your credits.
4. Property isn’t of the National Register of Historic Places
More than 60% of the tax credit projects are not on the National Register of Historic Places when the project starts. To qualify for the credit, you need to complete a three-part application. Parts one and two should be completed before you begin renovating the building.
5. What expenses qualify for the rehabilitation tax credit?
Expenditures for the build’s “hard cost” qualify for the rehabilitation tax credit including floors, windows, plumbing and wiring and “soft cost” such as architect and engineering fees.
