Real Estate Rehab and Tax Credits

by | Nov 15, 2018 | Cracking the Tax Code with Christy | 0 comments

In December 2017, legislators passed tax reform involving taxpayers who are home- owners looking to restore or renovate old homes or historically important buildings. This rehabilitation tax credit was created to entice property owners to earn tax breaks and credits. The law abolished the 10 percent credit originally provided to taxpayers for rehabilitating buildings built prior to 1936.  But the bill carries forward a 20% credit for certified rehabilitation of historic structures.

To claim the tax credit, the taxpayer must meet specific criteria. As part of the new legislation, taxpayers who choose to undertake rehabilitation projects can take 20 percent credit spread over five years, with a starting date of the beginning of the restoration process.

If you’re a taxpayer who owns a historically certified property, or a property or structure constructed prior to 1936, there is a transition law in place. This law allows owners to follow under the prior rehabilitation laws if the reconstruction or restoration project adheres to two conditions:

    • The taxpayer owned or leased the building on January 1, 2018, and the taxpayer continues to own or lease the building after that date.
    • The 24- or 60-month period selected by the taxpayer for the substantial rehabilitation test begins by June 20, 2018.

To claim the rehabilitation tax credit and a variety of other investment credits, use Form 3468, Investment Credit.  If you find yourself adventurous and willing to take on the reconstruction of an older property structure or historically certified building, contact the Law Offices of Christy Lee, P.C. so that we can guide you through the process of reporting the venture in order to obtain the tax credits.