Preservation Tax Incentives

Financial incentives are available at the federal, state and sometimes local level for historic preservation.

FEDERAL TAX INCENTIVES

Federal historic preservation incentives are managed by the National Park Service in partnership with the Texas Historical Commission. Information can be found at HERE.

A summary of these federal incentives follows.

Income-producing historic buildings that are certified by the National Park Service as historic structures (typically those listed on the National Register of Historic Places) are eligible for a 20% income tax credit based on the qualifying costs of the project. Eligible properties include commercial, industrial, agricultural or residential rental properties.

The charitable donation of a historic preservation easement to a qualifying organization such as Preservation Texas provides additional tax benefits. An easement permanently protects a structure and its site by prohibiting changes to the exterior (and in some cases interior) features and by restricting land uses. These restrictions are voluntary and negotiated between the landowner and the donee organization within federal guidelines. The value of the donation is determined by a professional appraiser who considers the potential reduction of the market value of the property after the imposition of these voluntary restrictions.

Rehabilitations of large historic structures often make use of a combination of the 20% tax credit and the Low-Income Housing Tax Credit (LIHTC). The LIHTC is approximately 9% of the project cost, and provides an incentive for the creation of affordable rental housing for low-income households.

STATE TAX INCENTIVES

The Texas Historic Preservation Tax Credit became effective in 2015. It provides for a tax credit of 25% of qualifying project costs for the rehabilitation of buildings listed on the National Register of Historic Places, as Recorded Texas Historic Landmarks or as State Antiquities Landmarks. Only buildings are eligible, and they must be used for income-producing or non-profit purposes. 

Government-owned structures do not qualify unless they have been leased, typically to a non-profit organization for an extended term. Non-profit organizations, despite not paying taxes, can sell their state tax credit. For example, a $100,000 church restoration may result in a $25,000 tax credit that can be sold by the church to a Texas corporation that pays the state franchise tax or state insurance premium tax. Tax credit brokers may also purchase a credit. The dollar value of the credit is negotiated between the tax credit certificate holder and the purchaser, typically somewhat less than face value.

LOCAL TAX INCENTIVES

Many local governments have adopted tax abatement or exemption programs to encourage the rehabilitation of historic structures, typically in historic downtown commercial districts managed by Main Street programs or in historic residential districts. Details about these local programs can be found by contacting the City Manager or similar official in the city in which a building is located. If your community does not yet have a local program, consider advocating for the establishment of such a program.