If your business occupies a large commercial space and you’re planning to relocate, expand, or renovate, don’t overlook the potential tax benefits of restoring a historic building. The Rehabilitation Tax Credit for Historic Buildings offers a valuable incentive that could significantly offset your project costs.
What Is the Rehabilitation Tax Credit?
The federal rehabilitation tax credit provides a 20% tax credit for the qualified rehabilitation expenditures (QREs) of a certified historic structure. This credit can be a powerful incentive for businesses that are willing to invest in revitalizing older, historically significant properties.
To qualify, the building must be:
- Depreciable property used in a trade or business or for the production of income
- Placed in service before the rehabilitation work begins
- Substantially rehabilitated, meaning that QREs exceed the greater of $5,000 or the cost of acquiring the building
Requirements for Qualified Rehabilitated Buildings
Only certain buildings and expenses qualify for this credit. A certified historic structure must be:
- Listed individually in the National Register of Historic Places, or
- Located in a registered historic district and certified by the National Park Service
Additionally, the building must be income-producing—used for business or rental purposes—and not held primarily for sale.
What Counts as Qualified Rehabilitation Expenditures (QREs)?
QREs include costs that are:
- Chargeable to capital account (e.g., construction, architectural fees)
- Directly related to the rehabilitation of the building’s structure or systems
However, land acquisition costs, enlargements, and costs associated with furnishings or landscaping are excluded.
The credit is claimed ratably over five years, with 4% allowed each year beginning in the year the rehabilitated building is placed in service.
Changes Made Under the Tax Cuts and Jobs Act (TCJA)
The Tax Cuts and Jobs Act of 2017 brought permanent changes to the rehabilitation credit:
- The full 20% credit must now be claimed over five years, not in the year the building is placed in service
- The 10% credit for pre-1936 buildings (not certified historic) has been eliminated
These changes apply to all projects beginning after December 31, 2017, and they are not scheduled to expire like other TCJA provisions.
Permanent Nature of the Rehabilitation Credit
Unlike many individual and business tax changes under the TCJA, the adjustments to the rehabilitation credit are permanent. That makes this a reliable incentive to consider for long-term planning.
Maximize the Tax Benefits of Building Rehabilitation
Rehabilitating an older building—especially one with historic significance—can be both financially rewarding and socially impactful. In addition to the Rehabilitation Tax Credit, you may also benefit from:
- Energy efficiency incentives
- Location-based tax credits
- State and local grants or subsidies
Talk to a Tax Professional Before You Begin
Before making an offer on a historic property or committing to renovation plans, speak with your tax advisor. They can help determine:
- Whether the building and expenses meet the credit’s qualifications
- How to properly document QREs
- What additional credits or deductions may be available
We work closely with clients and construction professionals to help maximize tax savings and ensure compliance. Contact us today to explore whether the Rehabilitation Tax Credit for Historic Buildings could work for your next commercial project.
© 2023. Updated July 2025.