it is important to understand which costs associated with a historic rehabilitation project generally qualify for tax credits and which costs may not be qualified for credits under the historic rehabilitation regulations. While some elements of this determination are made by the accountant based on our understanding of tax law and our professional judgment, certain costs are always considered non-qualified and can be identified by you prior to the start of the accountants work.

“Hard costs” of a historic rehabilitation tax credit project that are generally eligible:

  • Ceilings
  • Chimneys
  • Components of central air conditioning or heating systems
  • Electrical wiring and lighting fixtures
  • Elevators
  • Floors
  • Partitions
  • Plumbing and plumbing fixtures
  • Stairs
  • Sprinkler systems and fire escapes
  • Walls
  • Windows and doors

“Soft costs” of a historic rehabilitation tax credit project that are generally eligible:

  • Architect fees
  • Construction management costs
  • Construction period interest
  • Construction period real estate taxes
  • Developer fees
  • Engineering fees
  • Historic tax credit application fees

Costs of a historic rehabilitation tax credit project that are generally NOT eligible:

  • Acquisition costs including: building and land
  • Appliances
  • Blinds and window treatments
  • Cabinets (non-custom)
  • Carpeting (if tacked in place and not glued)
  • Decking, porches and porticos (not part of original building)
  • Demolition costs
  • Enlargements and new construction costs
  • Fencing
  • Feasibility studies
  • Financing fees
  • Furniture
  • Landscaping and planters
  • Leasing Expenses
  • Moving costs
  • Outdoor lighting remote from building
  • Parking lot
  • Paving
  • Retaining walls
  • Sidewalks
  • Signage
  • Sitework and storm sewer construction costs

Links to additional information:

Commonwealth of Virginia regulations: http://www.dhr.virginia.gov/pdf_files/Final%20Regs.pdf  

National Park Service: https://www.nps.gov/tps/tax-incentives/before-apply/qualified-expenses.htm

Internal Revenue Service (page 10): http://www.irs.gov/pub/irs-utl/faqrehab.pdf