Rehabilitation Tax Credits
The rehabilitation credit applies to costs you incur for rehabilitation and reconstruction of buildings. Rehabilitation includes renovation, restoration, and reconstruction. It does not include enlargement or new construction. The property and rehabilitation must meet certain guidelines: the property must be historic, the work must meet the Secretary of the Interiors Standards for Rehabilitation, and the project must be substantial. Generally, the percentage of costs you can take as a credit is 10% for some buildings placed in service before 1936 and 20% for certified historic structures. A tax credit differs from an income tax deduction. An income tax deduction lowers the amount of income subject to taxation. A tax credit, however, lowers the amount of tax owed. In general, a dollar of tax credit reduces the amount of income tax dollar for dollar.