Maryland Historic Preservation Tax Credits**
The purpose of state tax incentives is to encourage private sector investment in the rehabilitation and re-use of historic buildings and to promote investment in local economies.
The owner of a certified historic property in Maryland may have the opportunity to earn a state income tax credit on qualified rehabilitation expenditures (QREs). Whether they are planning to rehabilitate their primary or secondary residence or a commercial property, there are state incentives that may help.
State historic preservation tax credits have saved historic property owners $571,237.54 in income taxes in Harford County.
**State tax credits may be combined with county tax credits.
Homeowner tax credit
The Homeowner Tax is administered by the Maryland Historical Trust (MHT). The tax credit provides owners of certified heritage structures income tax credits equal to 20% of the cost of rehabilitation. The tax credit is available for owner-occupied residential property, as well as income-producing property.
The rehabilitation project must be "substantial" ($5,000 for owner-occupied residential property; and $5,000 or amount equal to the adjusted basis of the building, whichever is greater for commercial property). The rehabilitation project must be completed within a 24-month period. All of the rehabilitation work must conform to the Secretary of the Interior’s Standards for Rehabilitation, and must be approved by MHT prior to work commencing.
*** IMPORTANT: Anyone who plans combine state and county tax credits must obtain approval from MHT prior to starting the application for county tax credits. MHT tends to be more conservative in their review. Something approved by the HPC may not be approved by MHT. Having prior approval from MHT can expedite the county’s tax credit process.
Competitive commercial tax credit
Owners of income-producing properties may earn a state income tax credit (capped at $3 million) that is equal to 20%of eligible rehabilitation expenses for substantial rehabilitation projects. Substantial rehabilitation projects are defined as projects with eligible expenses that exceed the greater of the adjusted basis value of the structure or $25,000.
Small commercial tax credit
Eligible projects may earn a state income tax credit equal to 20% of qualified rehabilitation expenditures. Small commercial rehabilitations are defined as projects that do not exceed $500,000 in total qualified rehabilitation expenses and are not used for more than 75% residential rental purposes. The credit is capped at $50,000 in a 24-month period and must have a minimum of $5,000 of eligible expenses to qualify.
For more information about state tax credit programs visit the Maryland Historical Trust’s tax credit webpage: https://mht.maryland.gov/taxCredits.shtml