How to save money with historic tax credits

Baltimore City has nearly 70 neighborhoods that are designated as historic districts containing over 50,000 residential and commercial buildings. Thousands of home-owners and business owners across Baltimore City have used city, state and federal historic tax credits for rehabilitation projects on everything from small rowhouses in Seton Hill to large developments like the American Can Company building in Canton.

What is a historic tax credit?

Historic tax credits are financial incentives for residential or commercial rehabilitation projects that require property-owners to follow certain preservation standards. Home-owners should consider the city and state historic tax credits. Business owners or property owners rehabilitating rental properties should consider the city and federal historic tax credits.

  • Baltimore City Commission on Historic and Architectural Preservation administers a 10-year comprehensive property tax credit granted on the increased assessment directly resulting from qualifying improvements. Properties (including residential and commercial) contributing to local or National Register designated historic districts are eligible. Learn more.
  • Maryland Historical Trust administers a 20% refundable income tax credit based on the cost of qualified rehabilitation expenditures for projects exceeding $5,000 over a two-year period. Owner-occupied primary (or secondary) residences contributing to local or National Register historic districts are eligible. Learn more.
  • The National Park Service administers a 20% income tax credit is available for the rehabilitation of historic, income-producing buildings that are determined by the Secretary of the Interior, through the National Park Service, to be “certified historic structures.” A 10% tax credit is available for the rehabilitation of non-historic buildings placed in service before 1936. The building must be rehabilitated for an income-producing use such as a commercial or residential rental property. Learn more.

Am I located in a historic district?

These historic tax credit programs vary in eligibility requirements but they all require that you property be either located within a historic district or individually designated as a landmark. In addition, your property must be contributing to the historic district meaning that it typically must be 50 years or older. A new 1975 condo development in a historic district composed of mostly 1920s homes is likely non-contributing. Historic districts can be designated by Baltimore City, often known as CHAP districts, or by the National Park Service, historic districts listed on the National Register of Historic Places. Here are a few ways to check if your home or property is located in a historic district.

How do I use the state historic tax credit?

People who own their own homes are eligible for a state income tax credit of 20% off the cost of qualifying rehabilitation work, up to $50,000 in credits. Qualifying work includes things like installing a new roof, painting (interior and exterior), upgrading electric or plumbing service, and sanding wood floors. To qualify, the home must be located inside a designated historic neighborhood, must have been built as part of the historic development of the neighborhood, and the owner must spend more than $5000 on rehabilitation work over two years.

For example, say a property owner lives in an 80-year old house inside the Mayfield historic district. She plans to paint her house, repair the wood windows, install central air-conditioning, and upgrade some of the electrical work. The total cost of rehabilitation work is $50,000. Provided the property owner files the application before she does the work, and receives approval prior to starting, she is eligible for a $10,000 income tax credit from the State of Maryland.  Learn more about the Maryland historic tax credit program.

How do I use the city historic tax credit?

Homeowners are also eligible for a property tax credit from Baltimore City for the same type of historic rehabilitation work. The city credit offsets the increase in property assessment resulting from the rehabilitation work for ten years. To qualify, the home must be located inside a designated historic neighborhood, must have been built as part of the historic development of the neighborhood, and the rehabilitation work must exceed 25% of the assessed value of the house.

For example, John Smith owns a 100 year old house inside the Seton Hill historic district. He plans to sand the floors, fix a leaky foundation, upgrade the plumbing, and re-point the exterior bricks. The total cost of rehabilitation work is $75,000. The assessed value of the house (according to the official tax records) is $150,000 before the rehabilitation work, and will be $225,000 after the work. Provided Mr. Smith files the application before she does the work, and receives approval prior to starting, his property taxes will continue to be assessed using the pre-rehabilitation value of $150,000 for ten years after completion of his project. Learn more about the Baltimore City historic tax credit.