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How to Apply for Historic Restoration Tax Credits

Sean Cullen

Estimated Read Time: 2 minutes 9 seconds

Owners of historic income-producing properties in Wisconsin may be eligible for two income tax credits that can help pay for their building’s rehabilitation.

  1. The Federal Historic Preservation Tax Credit Program returns 20% of the cost of rehabilitating historic buildings to owners as a federal income tax credit.
  2. The Wisconsin Historic Preservation Tax Credit Program returns 20% of the cost of rehabilitating historic buildings, up to $3.5 million per parcel, to owners as a Wisconsin income tax credit.

How to qualify for the federal and state historic preservation credits:

  1. Own a historic building

A building is considered historic if it is listed in the National Register of Historic Places or if the NPS determines that it contributes to the character of a National Register historic district.

If an owner is using only the state tax credit, a building is considered historic if it is listed in the State Register or the National Register of Historic Places or if it contributes to the character of a listed historic district.

  1. Use the building for income-producing purposes

Income-producing buildings are those used in a trade or business or for the production of rental income.

  1. Formally apply to the Wisconsin Historical Society

Prior to submitting application materials, the Wisconsin Historical Society recommends you contact one of the preservation architects listed on their website. Depending on the complexity of the project, they may want to tour the building with you to determine if the proposed project meets standards. Application materials must be completed and mailed to the Society.

  1. Rehabilitate the building following program standards

All work must comply with the Secretary of Interior’s Standards for Rehabilitation.

  1. Spend the minimum amount required on rehabilitation

If an owner plans to spend an amount equal to or greater than the building’s adjusted basis value or $5,000, whichever is greater, then the owner can apply for the 20% federal tax credit. If an owner plans to spend less than the building’s adjusted basis value but more than $50,000, the owner can apply for the 20% state tax credit. If an owner plans to spend an amount equal to or greater than the adjusted basis value and greater than $50,000, the owner qualifies for both the federal and state tax credits. Both state and federal programs allow this amount of money to be spent in either a two-year or five-year period.

  1. Claim the credit for eligible expenses only

The cost of all work on the historic buildings, inside and out, is eligible for the credit with the exception of moveable equipment. The cost of site work, such as landscaping or paving, and the cost of new construction (such as new additions) are not eligible expenses.

  1. Maintain ownership of the building and the building’s historic character for five years

If within five years of the building being placed into service, it is sold or altered in a way that diminishes its historic character, the tax credit must be repaid to the IRS and to the Wisconsin Department of Revenue. Repayment is prorated over the five-year period after the building is placed in service. Once the completed work is approved, the owner may claim 20% of the total credit per year for five years. This new law applies to both the state and federal credits.

Applying for historic tax credits can seem like a daunting process but its much easier than you think, if you are prepared. To talk further about this process and if your building would qualify, send me an email at sean.cullen@jpcullen.com.

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