Rehabilitation Tax Credits

     Often times rehabilitation of a property can provide a renewed feel to the surrounding block and community at large.  In an attempt to encourage such renewal, Rehabilitation Tax Credits are offered by government entities.

     How Credit Applies:  The rehabilitation credit applies to costs you incur for rehabilitation and reconstruction of certain buildings. Rehabilitation includes renovation, restoration, and reconstruction. It does not include enlargement or new construction.

Generally, the percentage of costs you can take as a credit is 10% for buildings placed in service before 1936, and 20% for certified historic structures.

     Rehab Credits in Virginia:  To encourage the adaptive reuse of existing buildings, Virginia offers substantial relief from real estate taxes in Virginia is available to property owners who rescue, repair and rehabilitate qualified older buildings. Subject to the following qualifications, real estate tax is deferred on the value of the improvements to residentil and commercial property.

           Residential Property

Residential includes single-family dwellings, duplexes, multi-family dwelling units, & townhouses; and 1) Structure be no less than fourty (40) years of age; 2) If structure is assessed at less than $10,000, said structure can be demolished if not a registered Virginia Landmark or is determined by the Department of Historic Resources not to have contributory significance if in a registered historic district. If demolished, the replacement structure must be a single-family residence with an assessed value of at least 120% of the median value of other dwelling units in the neighborhood; 3) Assessed value must be increased by at least forty (40) percent, be designed for residential use after completion of improvement, and be improved without increasing the number of living units; and 4) Increasing the total square footage of structure will have no restrictions on size, as long the increases comply with City zoning ordiances.

Commercial real property

     Commercial property qualifies for the tax credits if:  1) It is not less than twenty-five (25) years of age; 2) Can be improved so as to increase the assessed value of the structure by no less than sixty (60) percent; 3) Can be improved without increasing the total square footage of such structure by more than one hundred percent (100%); and, 4) Can be designed for and suitable for commercial or industrial use after completion of such improvement.

Sources:

http://www.irs.gov/businesses/small/industries/article/0,,id=97599,00.html

http://www.roanokeva.gov/85256a8d0062af37/vwContentByKey/N255RS9L166CFIREN

http://www.youtube.com/watch?v=7wdxaYaIE8I