Tax Tips for Historic Property Owners

March 30, 2021

As a historic homeowner, you’re lucky enough to step back in time every day. From the original architecture, local history, and previous residents, your home is filled with stories from the past. Although protecting your historic home can be a challenge, you may be entitled to a range of tax incentives that could make rehabilitation projects and maintenance easier to handle. Keep reading to explore our tax tips for historic homeowners and the many ways to keep your historic home special.

Incentives for Historic Commercial Properties

Historic properties, neighborhoods, and local landmarks, may be entitled to tax incentives put in place by the federal and state governments. The National Register of Historic Places is monitored by the National Park Service, and is crucial to determining your eligibility for future tax benefits. Put in place to support public and private efforts to identify, evaluate, and protect America's historic and archeological resources, the National Park Service requires every historic property owner to apply for a national nomination prior to requesting any historic tax breaks or incentives. Working with your local preservation organization, such as Preserve the ‘Burg, is recommended when completing the historic landmark application, especially if you may be a first time historic property owner.

Once your property has received its Historic designation, you may begin applying for the Federal Rehabilitation Tax Credit, also known as, Historic Tax Credit. This incentive provides historic property owners the opportunity to receive a 20% tax credit for qualified rehabilitation expenses. In Florida, only income producing properties are eligible for this incentive. Many historic properties have been converted or restored to create a variety of commercial spaces. A common use for a historic property is the conversion to a hotel, such as The Vinoy in Downtown St. Pete. During the rehabilitation process, it’s important to consider the list of IRS approved expenditures for the structural components of a building that will qualify for the rehabilitation tax credit such as any updates to the walls, floors, windows, plumbing, etc,.

Incentives for Historic Residential Properties

As the owner of a historical residential property, your home will have to undergo a series of rehabilitation projects to protect and maintain the original character of your property. Although you may not be entitled to the federal rehabilitation tax benefits created for commercial properties, the city in which your property is located may offer a variety of resources and incentives you can take advantage of.

St. Petersburg, in particular, offers the Ad Valorem Tax Incentive, in which a property owner can be exempted up to 12.1 mils of certain property taxes for a ten-year period. This incentive applies to locally landmarked properties, National Register Properties, and properties considered contributing in both local and national register historic districts. The exemption in Pinellas County specifically, is not 100%, but rather $121 for every $10,000 spent on renovation over the course of 10 years. However, there is no cap on this exemption, and a historic property owner may receive a larger exemption if the property involves a larger restoration project.

St. Petersburg also provides historic property owners direct access to City staff who can provide assistance in courtesy design and maintenance. As the property owner decides to begin new restoration projects throughout their home, they can count on historic preservation and architectural experts to advise on their projects and keep the local history alive within the community.

Understanding Easement Donations

According to the National Trust of Historic Preservation, preservation easements “protect properties with historic, architectural, or archaeological significance and, in addition, can be used to preserve important natural land values that comprise the setting of historic buildings.” In a nutshell, a historic facade easement, places the property owner in a position where they give away the rights to change the exterior of their property in perpetuity to a non-profit group. It’s important to note, the property owner is still responsible for maintaining their property. The easement holding organization’s role is to monitor the property to ensure it remains in good condition. Any changes that the property owner would like to incorporate, must be approved by the easement holding organization as well.

If a homeowner chooses to donate an easement to a qualified preservation organization, such as Preserve the ‘Burg, they are vowing to protect the historical integrity of their property from potential threats, such as demolition. Submitting an easement donation also requires the homeowner to submit an endowment contribution that provides the designated easement holder organization the ability to cover legal costs of a complex legal translation associated with the property, and also allows the organization to fund the annual inspections the building requires. The easement holding organization will only make repairs to the historical property, after the owner was adequately asked to do so, and had not completed the request. It is the easement holding organization who is responsible for protecting the historical legacy of the property, so they are allowed to step in when necessary.

Preservation organizations, such as Preserve the ‘Burg, use easement donations to facilitate the monitoring of a historic property, ensuring the exterior and original interior features of the home are in good condition. As mentioned by the City of St. Petersburg, a façade easement donation allows a historic property to be used as it currently is, as well as, allowing compatible changes into the future, while preserving its exterior character and possibly increasing the economic viability of the building to future tenants. A local living example of a facade easement is The Snell Arcade, located at the intersection of Central Avenue and 4th Street North. Through the Historic Properties Program, Preserve the ‘Burg, can now accept facade easement donations, ensuring St. Pete history will remain protected and preserved.

When an easement donation is made, the property owner must be prepared for a permanent commitment. Meaning the easement cannot be undone or changed, binding the current and future owners of the property. This provides the property owner with the reassurance that their building’s historic imprint on the community will be preserved and cherished for the future.

Aside from the peace of mind that your historic property will be protected, an easement donation provides historic homeowners with additional tax benefits at the federal and state levels. As stated by the IRS, homeowners who donate qualified preservation easements to qualified easement-holding organizations may be eligible for a federal charitable tax deduction, created to aid the homeowner in the costs associated with permanently protecting their historic property and making future renovations. The tax donation is generally calculated to be the difference in the value held by the existing property and the value of what could potentially be built on it. However, it is recommended to work with a qualified appraiser to determine the potential value of your property.

Get Help From an Expert

Preserving your historic property can feel overwhelming, between managing ongoing rehabilitation projects and protecting the history and character of your space—it’s a lot to handle. The good news you don’t have to do it alone. Our preservation experts can help guide you through historic landmark designations, tax benefits, and protecting the legacy of your home. Contact us today to get started.

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