The Federal Investment Tax Credit program allows up to 20% of the cost of certified rehabilitation work on qualified historic properties to be credited against Federal income taxes. In August 2005, the State of Oklahoma passed legislation creating a similar 20% tax credit program against State income taxes. In combination, owners of qualified historic properties have the potential of taking 40% of the cost of certified rehabilitation work as tax credits.
Unlike tax deductions, a tax credit reduces the amount of tax you owe dollar for dollar. In this case, it’s like getting 40% of your investment right back in your pocket.
The restrictions on the Investment Tax Credits are as follows:
- Must be an income producing property — not a personal residence.
- Must be listed individually on the National Register of Historic Places or Contributing to a National Register District.
- Rehabilitation work must meet the U. S. Secretary of Interior’s Standards for Rehabilitation.
- The expense of rehabilitation must meet the criteria of being “substantial” — at least equal to the adjusted basis of the property, minus land value. Only the cost of approved rehabilitation work is eligible.
Tax credits have been used successfully in Tulsa and across the country to repair and restore historic structures, bringing them back to life with new uses. For a local example, take a look at the beautiful renovations and loft conversions at the Philtower building.
An application may be initiated with the Oklahoma State Historic Preservation Office in Oklahoma City. Applicants should contact the SHPO before beginning work for a preliminary determination of eligibility. Information is also available from the National Park Service at http://www.nps.gov/tps/tax-incentives.htm.