Sweet Deal: Historic Tax Credits Could Save you up to 45%

December 11, 2023 • Luke Scott, AIA

It used to be easier to just always “build new.” It was cheaper and fewer headaches than trying to rehab.

 

Two things have changed that:

  1. Federal and State legislation has created historic tax credit incentives for rehabilitating buildings that are listed or qualify for listing on the National or State Register of Historic Places.
  2. Municipalities seeing the economic benefits of revitalizing downtowns.

 

At WDM Architects, we have developed a niche expertise in understanding how Historic tax credits work along with the ins-and-outs of how to apply for them.

The National Park Service allows for a 20% Historic tax credit and most states offer an additional 15-20% credit. The State of Kansas offers a 25%, the best in the country. This means owners or investors can realize a tax credit of 35% to 45% of the construction value of a project. This benefit has tipped the scale and made the renovation of historic buildings an economic alternative to building new.

There are other benefits to historic rehabilitation as well. Studies show Historic buildings rent, lease and sell more readily than new construction. Their “unique character” entices tenants/owners to retain their leases longer and maintain the property better. They are often “one of a kind” and create a sense of pride with the community as well as tenants.

 

Common misunderstandings related to historic tax credits are:

  • “The Government will control how I do my project …”  The National Park Service does have some guidelines, followed by both State and National reviewers, but an architect that has worked repeatedly with the Historic Standards can guide clients through the process without having to sacrifice the owner’s goals or compromise the owner’s balance sheet.  Usually, those standards guide us to deliver a quality design that meets both the expectations of the client and the NPS.
  • “The red tape isn’t worth the savings …”  An experienced historic architect can prepare and file the needed forms and take the uncertainty out of the process.
  • “We are a non-profit and wouldn’t reap the tax benefits …”  Federal credits cannot be sold, but state credits can be secured by non-profits and sold to interested parties. Banks and investment groups are interested in the purchase of these tax credits, which can benefit any business structure.

 

There are a lot of stories in the walls of old buildings. There can also be a lot of value if you work with the right people who realize it.  If you have time to pull up a chair, we can put pencil to paper and see what is the best option.