North Carolina and Federal Historic Rehabilitation Tax Credits

What is a Tax Credit?
A tax credit differs from a tax deduction.  A tax deduction simply lowers the amount of your income that is subject to taxation.  A tax credit provides a dollar-for-dollar reduction in the amount of taxes you owe.  For example, if your tax bill is $10,000, a $4,000 credit will reduce you tax bill to $6,000. 

North Carolina Rehabilitation Tax Credits
In 1997, the North Carolina General Assembly approved the most comprehensive state historic preservation tax credit program in the nation.  Two tax credit packages were approved:

A 30% state income tax credit for certified rehabilitations of non-income-producing certified historic structures, including personal residences.  Qualified rehabilitation expenses must exceed $25,000 within a two year period. 

A 20% state income tax credit for certified rehabilitations of income-producing certified historic structures, such as commercial and retail buildings.  This credit is available for rehabilitations that qualify for the 20% federal tax credit (see below).  The combination of the two credits can reduce the cost of certified rehabilitations by 40%.

Federal Rehabilitation Tax Credits
There are two federal tax credits available for rehabilitation of buildings:

A 20% federal income tax credit for certified rehabilitations of income-producing certified historic structures.  Rehabilitation projects, which receive this credit, are eligible for the 20% state credit as well. 

A 10% federal income tax credit for rehabilitations of income-producing non-historic structures built before 1936 and used for non-residential purposes.  Qualified rehabilitation expenses must exceed adjusted basis of building within a two-year period or five-year period for phased projects.  There is no federal tax credit for rehabilitation of non-income-producing properties, such as private homes. 

For More Information. . .

Information and applications are available from the State Historic Preservation Office (SHPO).  Applications are subject to review by the SHPO and, for Federal tax credits, the National Park Service.