Rehabilitation Tax Credits
Frequently Asked Questions
The amount of the credit is based on total rehabilitation costs. The federal credit is 20% of eligible rehabilitation expenses. The state credit is 25% of eligible rehabilitation expenses. In some cases, taxpayers can qualify under both programs, allowing them to claim credits of 45% of their eligible rehabilitation expenses.
What buildings qualify for the tax credit program? The credits described above are available only for Certified Historic Structures, which are defined as follows:
Under the federal program, a certified historic structure is one that is either:
• Individually listed on the National Register of Historic Places, or
• Certified as contributing to a district that is so listed
Under the state program, a certified historic structure is one that is:
• Individually listed on the Virginia Landmarks Register, or
• Certified as eligible for listing, or
• Certified as a contributing structure in a district that is so listed.
With a few exceptions, most Virginia properties that are listed on one of these registers are listed on both. Note, however, that National and Virginia Register historic districts may be different from locally designated historic districts. Certification that a building contributes to a listed district, or for purposes of the state credit, is eligible for individual listing, is obtained only by submitting Part 1 of the tax credit application.
What work qualifies for the credits? The rehabilitation work for the entire project must meet The Secretary of the Interior’s Standards for Rehabilitation.If the project does not meet these standards, no part of the credit may be claimed. If the work is certified as meeting these standards, the credit is based on all eligible expenses.
Technically speaking, eligible expenses include any work that is properly chargeable to a building’s capital account in connection with a certified rehabilitation. Essentially, this means that all work done to structural components of the building will be eligible, as well as certain soft costs such as architectural and engineering fees, construction period interest and taxes, construction management costs, and reasonable developer fees. Expenses related to new heating, plumbing and electrical systems are eligible, as well as expenses related to updating kitchens and bathrooms, compliance with ADA, and fire suppression systems and fire escapes. Acquisition costs, however, and any expenses attributable to additions or enlargements of the building, are not eligible. Under the federal program, site work and landscaping elements are not eligible expenses. Under the state program, certain site work may be eligible.
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The Petersburg High School, built in 1918, sat vacant for more than a decade. Its rehabilitation as the Appomattox Regional Governor's School was made feasible using state and federal tax credits.
Sample Description of Rehabilitation Proposal
Selected VLR/NR Historic District Maps