Are Rehabilitation Tax Credits Worth It To Investors?

The question as to whether a rehabilitation tax credit is worth it to investors or not is an easy one to answer. All tax credits that are available to a taxpayer, especially investors, in order to reduce their taxes are worth it. Regardless of the amount of the credit, it is silly for an investor not to consider a tax credit that is available.

What Is a Rehabilitation Tax Credit?

A rehabilitation tax credit is one that is allowed for the preservation and rehabilitation of a historic home or site. The amount of credit that is available to a taxpayer depends on when the building was built. For building used prior to the year 1936, the amount of credit is 10 percent of the rehabilitation costs. Certified historic structures receive a credit of 20 percent of the cost.

Using the Credit as an Offset

An investor who meets either of those criteria can use the credit as a way to offset any taxes they may owe. This includes taxes on capital gains that may have been earned, which are taxed at a rate up to 15 percent for long-term gains and a maximum of 35 percent for short-term capital gains. The best part of a tax credit is that any unused portion of the credit can be carried forward and applied for a period of up to 5 years.


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