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About the Historic Tax Credit

The federal historic rehabilitation tax credit (HTC) program is an indirect federal subsidy to finance the rehabilitation of historic buildings with a 20 percent tax credit for qualified expenditures.  Before enactment of tax reform legislation at the end of 2017, as noted below, there was also a 10 percent non-historic rehabilitation tax credit for pre-1936 buildings.


The HTC has its roots in the National Historic Preservation Act of 1966, which created the National Register of Historic Places, which helped coordinate and support public and private efforts to identify, evaluate and protect historic and archeological resources. A decade later, in 1976, the federal government began providing tax incentives for historic building renovations in the form of accelerated depreciation. Congress introduced a HTC in 1979, with anyone who rehabilitated a building 20 years or older receiving a 10 percent credit based on qualified expenditures. In 1981, the program became three-tiered: 15 percent for buildings 30-39 years old, 20 percent for buildings 40 or older and 25 percent for buildings deemed historic structures.

During the 1986 federal tax reform, the credit was changed to a two-tier system with a 10 percent credit for nonresidential buildings placed in service before 1936 and a 20 percent credit for structures deemed historic by the National Park Service. It is administered jointly by the Department of the Interior and the Department of the Treasury.

The Tax Cuts and Jobs Act (P.L. 115-97) was signed on Dec. 22, 2017 and the new tax legislation went into effect Jan. 1, 2018. There are some key amendments to the HTC program. The new rules are applicable for qualified rehabilitation expenditures (QREs) paid or incurred after Dec. 31, 2017, subject to certain transition rules. Under the new law, the 20 percent tax credit for certified historic structures is retained and modified, requiring the 20 percent HTC to be claimed “ratably” over the five-year period beginning in the taxable year in which the building is placed in service. In addition, under the new tax law, the 10 percent rehabilitation tax credit is repealed for QREs paid or incurred after Dec. 31, 2017. The new tax law does provide for a transition rule.  Under that rule, rehabilitation tax credits will be claimed under the provisions that existed prior to P.L. 115-97. To qualify for the transition rule, two criteria must be met:  the building must be owned or leased by the taxpayer during the entirety of the period after Dec. 31, 2017 and, the 24-month (or 60-month) substantial rehabilitation measurement period must begin no later than 180 days after the enactment of P.L. 115-97.  Previously, qualified rehabilitation expenditures with respect to any qualified rehabilitated building were taken into account for the taxable year in which such building is placed in service.

State Credits

Most state tax credit programs mirror the national program, although often with different percentages. A building owner generates credits by completing a certified rehabilitation on a qualified rehabilitation building.

20 Percent Credit

To qualify for the 20 percent credit, a building must be a certified historic structure (buildings individually listed on the National Register of Historic Places or listed as a contributing building in a National Register or state or local historic district certified by the Secretary of the Interior. The National Park Service determines if a building is a certified historic structure by approving Part 1 of the application.

10 Percent Credit (repealed)

Prior to repeal, to qualify for the 10 percent credit, a building must have been placed in service before 1936 and must not be considered a certified historic structure. Non-contributing buildings with a historic district can use the 10 percent credit but buildings that will be used as residential rental property don’t qualify.

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