In order to preserve historic structures, the IRS offers tax credits to offset the cost of rehabilitating certain properties. These tax credits can be split into two categories:
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10% Credit for the Rehabilitation of Non-Historic Buildings placed in service before 1936, and
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20% Credit for the Certified Rehabilitation of Certified Historic Structures
The 10% Rehabilitation Tax Credit is for any property originally placed in service prior to 1936. The IRS requires that the renovation be “substantial,” exceeding the adjusted basis of the property, or $5,000, whichever is greater. It also requires that the property be rehabilitated for non-residential uses.
IRS requirements state that the building must not have been moved since 1935 and that the property meets the following tests for retention of structural members:
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At least 50% of the external walls existing at the time rehabilitation began must remain in place as external walls at the completion of the rehabilitation,
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At least 75% of exterior walls must remain in place as external or internal walls, and
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At least 75% of internal structural framework must remain in place
The 20% credit is similar to the 10% credit but requires that the property be a certified historic structure. A certified historic structure is a building that is listed individually in the National Register of Historic Places OR a building that is located in a registered historic district and certified by the National Park Service as contributing to the historic significance of that district. Additionally, the credit requires that the National Park Service certify the rehabilitation.