Preserving the character and historic charm of the historic homes in Washington, DC isn't just a matter of pride; it's also an investment in the city's rich cultural heritage. The District of Columbia offers a range of tax credits to incentivize homeowners to protect and maintain historic properties. If you own a historic home in the District, explore the potential tax benefits for historic designation of your DC home.
Eligibility for Historic Designation Tax Credits
Before delving into the details about tax credits, it's essential to first understand the eligibility criteria. To be eligible for these credits, the following things must be true:
- Location: Your home must be located within the District of Columbia.
- Historic Designation: It must be listed on the National Register of Historic Places or designated as a historic landmark by the DC Historic Preservation Review Board (HPRB).
Rehabilitation Standards: Your property should be undergoing rehabilitation or restoration work that meets the Secretary of the Interior's Standards for Rehabilitation.
Types of Tax Credits Available
The tax credits you can claim will depend on the nature and the extent of the restoration or rehabilitation work you're overseeing. The following are key credits for owners of historic DC properties:
- 20% Federal Historic Preservation Tax Credit (HTC): This credit is aimed at owners of income-producing historic properties, such as apartment buildings, hotels, and commercial structures. It's calculated based on the qualified rehabilitation expenditures incurred for the project.
- 5% DC Matching Grant: If you qualify for the 20% Federal HTC, you may also be eligible for the 5% DC Matching Grant. This grant matches the federal HTC on a dollar-for-dollar basis, up to 5% of the qualified rehabilitation expenditures
- 25% DC Historic Homeowner Grant: Homeowners residing in owner-occupied historic properties can benefit from the 25% DC Historic Homeowner Grant. This grant offers a 25% reimbursement of qualified rehabilitation expenditures, with a maximum benefit of $50,000.
Understanding the Application Process
Incentives and tax credits can be a benefit to owning and preserving a piece of DC history. Still, it's vital to know that navigating the application process for historic designation and claiming those credits involves several steps.
First, you should begin by completing an application for historic designation. You'll also need to provide the necessary documentation to the HPRB. They will review your application to determine whether your property qualifies for designation.
Once your property receives historic designation, the next step is to prepare a rehabilitation plan outlining all intended work. This plan must be submitted to the HPRB and given their approval. With an approved plan in hand, you can then proceed to complete the rehabilitation project according to its specifications.
After rehabilitation work is complete, you can apply for those tax credits. They can be claimed over a span of five years and are transferable to developers or investors.
Reaping the Tax Benefits of Owning a Historic DC Home
Preserving the history of your DC home can be a rewarding adventure, both personally and financially. The tax credits available through historic designation can significantly offset rehabilitation and restoration costs. If you are wondering how these tax credits could fit into your overall financial strategy or need expert assistance with strategic tax planning and optimization, Myrick CPA can help.
With a wealth of experience and a deep understanding of DC's unique tax landscape, the Myrick team is here to provide you with the guidance you need for financial success. Contact us today with any questions.