Tax Savings for Owners of Historic Homes
25% State Historic Rehabilitation Tax Credit
What is the tax credit and what are the benefits?
Taxpayers who rehabilitate their owner-occupied residence may be eligible to subtract 25% of the costs of many expensive repairs and renovations from their state income taxes. The South Carolina Historic Rehabilitation Incentives Act (Section 12-6-3535) benefits homeowners financially, preserves historic buildings, and enhances or local communities and the quality of life in our state.
Example
An owner who meets the requirements of the tax credit program and spends $40,000 on allowable rehabilitation expenses for his home can earn:
$ 40,000 in 'rehabilitation expenses'
x 25%
$10,000 state income tax credit
In this example, the taxpayer will be able to subtract $2,000 per year from his South Carolina income taxes for a five-year period.
Is my residence eligible for the credit?
Your building must meet both of these criteria:
1. You must own and live in the building or a portion of the building that will be rehabilitated. It can be a house or another type of historic building, such as a school or store, that you are rehabilitating to live in. A historic outbuilding associated with your residence, such as a barn or a garage, can also be eligible for the credit. The credit does not apply to buildings or portions of buildings that are used in a trade or business or produce income.
2. Your building must be one of the following:
listed individually in the National Register of Historic Places,
contributing to a listed National Register historic district,
determined by the State Historic Preservation Office (SHPO) to be eligible for individual listing in the National Register, or
an outbuilding that contributes to the significance of a property listed in the National Register.
Who do I notify?
Review and Approval by the State Historic Preservation Office (SHPO) is required before work begins!!!
Plans for the rehabilitation project must be approved by the State Historic Preservation Office (SHPO) to ensure that all work respects the historic character of the building while allowing for reasonable changes to meet today’s needs. The SHPO must certify that all project work - including expenses that are not eligible for the credit - meet the Secretary of the Interior’s Standards for Rehabilitation. When the rehabilitation is completed, the SHPO must verify that the completed project is consistent with the previously approved proposal.
What expenses qualify for the credit?
Money spent in the following categories may be counted as 'Rehabilitation Expenses' when calculating the amount of credit:
preservation and rehabilitation work done to the exterior of a historic structure;
repair and rehabilitation of historic structural systems;
restoration of historic plaster;
energy efficiency measures except insulation in frame walls;
repairs or installation of heating, air conditioning, or ventilating systems;
repairs or installation of electrical or plumbing systems exclusive of new electrical appliances and electrical or plumbing fixtures; and
architectural and engineering fees.
Allowable expenses do not include the cost of new construction beyond the volume of the existing building, the cost of acquiring or marketing the property, the value of an owner’s personal labor, or the cost of personal property.
How much money must I spend to qualify?
You must spend more than $15,000 within 36 months on 'Rehabilitation Expenses' listed above.
When can I claim the credit?
The credit must be taken over a 5-year period, beginning with the year in which the property is 'placed in service' (meaning the rehabilitation is complete and the building is used as an owner-occupied residence). If your tax credit installment for a year exceeds your tax liability you may carry the credit installment forward for up to 5 more years. You will claim the credit by submitting South Carolina Department of Revenue form SC SCH. TC-22 with your state income tax return. The form is available on the SC DOR website. A taxpayer may only claim 1 tax credit on the same building within a 10-year period.
How do I get started?
1. Complete the S1 portion of the tax application. The SHPO will use this form to verify the historic status of the building.
2. Download the pieces of the Application Packet or contact the SHPO to request a copy through the mail. The application packet provides tips to guide you successfully through the review and approval process.
3. Consult with an attorney or tax specialist to advise you on the tax aspects of the program and to help you determine the effect of the credit on your tax liability. While the goal of the tax credit is to preserve historic buildings, it is also an income tax program and taxpayers must meet South Carolina Department of Revenue (DOR) requirements.