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Historic Tax Incentives & Your New In-Plant Office Building

In-plant Office

If you are looking to restore an older building for your new office, but are having trouble funding it, historic tax incentives may be able to help.

How Do Historic Tax Incentives Work?

Created in 1978, the Federal Historic Tax Credit (HTC) has helped building owners rehabilitate and reuse older buildings. Historic tax credits are tax incentives used to encourage the re-use and rehabilitation of older buildings.

Buildings certified by the National Register for Historic Places will be able to receive credit equal to 20 percent of the cost of rehabilitation. Even if your building doesn’t qualify as a historic building, it can still receive 10 percent credit. However, it must have been built before 1936.

What Buildings Qualify for Credits?

To qualify, the building must meet some basic requirements:

  • It must pass a “substantial rehabilitation test”
  • Rehabilitation must be completed according to the Standards for Rehabilitation
  • The building must be used for the purpose of creating income
Passing Rehabilitation Tests

To pass a rehabilitation test, the cost of rehabilitation must exceed the pre-rehabilitation cost by at least $5,000. Even then, some items are not covered, including, but not limited to:

  • Acquisition costs
  • Landscaping
  • Window treatments

Items that are eligible include:

  • Walls
  • Ceilings
  • Chimneys
  • Stairs
Keep in Line with the Standards for Rehabilitation

While you will be able to retrofit your building and add modular offices or other structures, the Standards for Rehabilitation prohibit any changes that affect “the defining characteristics of the building and its site and environment, as well as attached, adjacent, or related new construction.” These characteristics include both the interior and exterior. It does take into account the “economic and technical feasibility” of the construction.

The Building Must be Producing Income

If your building won’t be producing income for at least five years, it will not be able to receive HTC. Therefore, private residences are not eligible for HTC unless a part of it is used for business. This requirement is to ensure that a considerable amount is spent rehabilitating the building.

Before you begin to retrofit your building with modular offices or other structures, talk with your tax advisor first to ensure that it’ll benefit you.

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