Historic Tax Credits Explained for Old House Owners

Historic tax credits reward people who rehabilitate historic buildings. At the federal level, the Historic Tax Credit offers a 20% income tax credit for qualified rehabilitation expenses on certified historic structures – but only when the building is income-producing, such as a rental property or commercial building, and the work meets federal preservation standards. Owner-occupied homes don't qualify for the federal credit, though many states offer their own historic credits or incentives, some of which do apply to homeowners. This guide explains how these programs generally work.

What is a historic tax credit?

A tax credit reduces the amount of income tax you owe, dollar for dollar, which makes it more valuable than a deduction of the same size. Historic tax credits exist to encourage private investment in preserving older buildings that might otherwise be demolished or left vacant – including many houses that have been abandoned. They're part of why historic neighborhoods in many cities have been revitalized.

The federal Historic Tax Credit

The federal program is administered jointly by the National Park Service (NPS) and the Internal Revenue Service (IRS), working with each state's Historic Preservation Office.

Who qualifies

To use the federal 20% credit, generally:

• the building must be a certified historic structure – individually listed in the National Register of Historic Places, or a building that contributes to the significance of a registered historic district;
• the building must be income-producing after rehabilitation, such as a rental home, apartment building, office, or shop;
• the rehabilitation must be substantial, meaning qualified expenses exceed a threshold tied to the building's adjusted basis, as defined by IRS rules;
• the work must meet the Secretary of the Interior's Standards for Rehabilitation.

Since changes made by federal tax legislation in 2017, the 20% credit is claimed over five years rather than all at once, and the separate 10% credit for older non-historic buildings was eliminated.

What the standards mean in practice

The Secretary of the Interior's Standards emphasize preserving a building's historic character. In plain terms, they encourage repairing original features rather than replacing them, using compatible materials when replacement is necessary, and making new additions distinguishable from the historic structure without overwhelming it. This often aligns well with the approach described in our step-by-step restoration guide.

The application process

The federal process uses a three-part application, reviewed first by the SHPO and then by the NPS:

1. Part 1 – Evaluation of Significance: establishes that the building is a certified historic structure (or contributes to a historic district).
2. Part 2 – Description of Rehabilitation: describes the planned work, with photographs and drawings, so reviewers can confirm it meets the Standards.
3. Part 3 – Request for Certification of Completed Work: submitted after the project to certify the work was done as approved.

Fees may apply. Submitting Part 2 and receiving approval before starting work is strongly recommended; work done without approval may not qualify.

State historic tax credits

Many states have their own historic tax credit programs, and they vary widely. Some mirror the federal rules for income-producing properties, while others include owner-occupied homes. Credit percentages, caps, eligible buildings, and application procedures differ, and some state credits can be combined with the federal credit for rental properties. Your SHPO's website is the best place to learn what's available.

Other incentives for historic homeowners

Even if tax credits don't apply, other incentives may exist:

• local property tax abatements or freezes for rehabilitated historic homes in some cities;
• preservation easements, which in certain circumstances may provide a charitable deduction;
• local grant or low-interest loan programs for historic facade or home repair;
• technical assistance from preservation organizations.

Is your old or abandoned house historic?

A house doesn't qualify just because it's old. Check whether it's individually listed on the National Register or located in a registered historic district – your SHPO or local preservation office can tell you. Being in a locally designated district may bring design review requirements even if no tax credit applies. Learn to recognize styles in architectural styles you'll see in old American houses.

Pros and cons of using historic tax credits

Advantages: significant financial support for qualifying projects, guidance that helps protect valuable historic features, and often higher-quality results.

Considerations: design restrictions, approval timelines, documentation requirements, and recapture rules that may require repaying part of the credit if the property is sold or changed within a certain period. Professional help is often worthwhile.

How historic credits fit into your renovation budget

Credits don't reduce upfront costs – they reduce taxes later. Plan your cash flow accordingly. Factor credits into a full budget alongside the cost to renovate an abandoned house, and use them as one input in your renovate or demolish decision.

Frequently Asked Questions

Can homeowners get historic tax credits?

Not the federal credit for a home you live in – it requires an income-producing property. However, some state programs and local incentives are available to owner-occupants.

How much is the federal historic tax credit?

The federal credit is 20% of qualified rehabilitation expenditures for certified historic structures, claimed over five years, subject to IRS rules.

Does my house need to be on the National Register?

For the federal credit, the building must be individually listed or contribute to a registered historic district. State programs may have different eligibility rules.

Can I start renovating before I apply?

It's risky. Work that doesn't meet the Standards, or that was completed without review, may not be certified. Apply and get approval before major work begins.

Who reviews historic tax credit applications?

Your State Historic Preservation Office reviews applications first, and the National Park Service makes the final certification decisions for the federal credit.