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Tax Credits That Let You Remake History

State Offsets Give Old-Home Renovators Big Budget Boost

By Barbara Ruben
Special to The Washington Post
Saturday, April 10, 2004; Page F01

Paul Ferguson grew up in the South Arlington neighborhood of Fairlington, a leafy community of brick Colonial-style homes with slate roofs, built to help ease the World War II housing shortage. He wanted to remain there, but after the birth of his second child, he wasn't sure his three-story, 1,800-square-foot unit could accommodate his growing family unless it underwent substantial -- and costly -- renovation.

But because residents of homes on the National Register of Historic Places and the Virginia Landmarks Register, including those in Fairlington, can get a 25 percent credit on their state income taxes for renovations, Ferguson decided to pursue remodeling.

Paul Ferguson, and his wife, Karen Keyes, shown with sons Timothy, 5, and Daniel, 2, used Virginia's 25 percent tax credit to expand their Arlington home -- on the state's landmarks register -- to fit a growing family. (Hyosub Shin For The Washington Post)

Credits and Contacts

Here is a summary of local historic preservation tax credits:


• Amount of credit: 20 percent

• Limitations: Owners must spend at least $5,000 over a 24-month period. The maximum credit allowed is $3 million. The law is set to expire on June 1, unless the Maryland General Assembly extends it.

• Receiving the credit: The state issues a check for the amount of the credit beyond a year's tax bill.

• Contact: Maryland Historic Trust, 410-514-7639; www.marylandhistorictrust.net/taxcr.html


• Amount of credit: 25 percent

• Limitations: Owners must spend at least 25 percent of the value of the structure itself. Expenses for additions or enlargements are not eligible.

• Receiving the credit: Property owners can carry over the unused amount of the credit for 10 years or until it is used up.

• Contact: Department of Historic Resources, Winchester office (which serves Northern Virginia), 540-722-3428; www.dhr.state.va.us.

District of Columbia

• Amount of credit: Varies from 15 to 35 percent

• Limitations: The credit is not currently funded. If the program were funded, recipients could live only in certain designated historic neighborhoods and would have to make 120 percent or less of the median income. There would be a $25,000 cap per project.

• Contact: Office of Historic Preservation, 202-442-8818

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Under the tax credit program, if a homeowner spends $40,000 on renovations, he will reap a $10,000 credit on state income taxes that can be carried over for years.

Because the money can't be used to change the exterior of the structure, Ferguson decided to look upward for space. In 2002, he renovated his attic, turning it into a study and an extra bathroom for his kids.

"The credit was a deciding factor," said Ferguson, who is a member of the Arlington County Board. "It's important because it allows families who are looking for ways to stay in their historic homes a means to do so."

Most homeowners can't take advantage of the 20 percent federal tax credit for historic preservation because it is available only for income-producing properties, but state tax credits can help make residential renovations and repairs easier on the pocketbook. Maryland has a 20 percent credit that is similar to Virginia's 25 percent credit.

Although the District has had a law on the books since 2002 to give restoration credits to low- and moderate-income homeowners in certain historic areas, money has not been allocated in the city's budget to pay for the program.

To be eligible for any of the credits, homes can't be merely old; they must be listed on a state or national register of historic homes or be in a neighborhood that has been designated historic.

Applying for the credits is a multi-step process. Those interested are encouraged to submit an application before embarking on a home-improvement project. Before and after photos of the project also must be submitted.

Tyler Gearhart, executive director of Preservation Maryland, said the state's tax credit "has been by far our most powerful tool for promoting and enacting historic preservation. The tax credit is widely seen as the number one tool for smart growth."

The tax credits can help preserve aging neighborhoods that might otherwise have fallen to the wrecking ball due to neglect, said Patrick Lally, director of federal affairs for the National Trust for Historic Preservation.

"Preservation can often be perceived as an elitist luxury, but historic preservation tax credits can go a long way in helping keep older neighborhoods intact," he said. "Taking care of an older house is inherently more expensive than a newly built one. It's an added level that should not be underestimated and one that homeowners often need help in meeting."

Lally uses his own historic Capitol Hill townhouse as an example. His leaking slate roof cost much more to repair than if it had been covered with more modern asphalt shingles. If homeowners don't have the means to pay more for upkeep, historic homes can fall into disrepair, he said.

The National Trust has worked to extend the federal tax credit program to individual homeowners, but without much success, even though the Historic Homeownership Act has had bipartisan support in Congress.

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