The Virginia Historic Rehabilitation Tax Credit Program

So, what's the Rehabilitation Tax Credit Program all about? Well, actually it's two programs, one federal and the other state. Both programs were established to encourage rehabilitation of historic buildings by giving property owners substantial incentives for preserving these structures and their surrounding communities.

Why? Why do this? Because historic places not only connect us to our past, they also revitalize neighborhoods and build community pride, keeping inner areas of a city alive as shopping centers and suburban developments sprawl and crawl at the outer edges.

Why Holmes Run Acres? Yes, it's true that the architecture of the neighborhood is almost unique in the Northern Virginia area. But perhaps more importantly, the mid-century style of these homes represents an important time in our nation's history. Post war dreams were full of energy and optimism. The age of a man on the moon was just around the corner. And architectural design was all about light, space, and form follows function. It was a bright and modern future. Nothing says this better than Holmes Run Acres.

Being listed on Virginia's Historic Register will open the door for HRA residents to receive a tax credit for renovations that stay true to the neighborhood's architectural style. The following frequently asked questions and answers explain the details of the Virginia program.

What are Rehabilitation Tax Credits?
A tax credit differs from an income tax deduction. An income tax deduction lowers the amount of income subject to taxation. A tax credit, however, lowers the amount of tax owed. In general, a dollar of tax credit reduces the amount of income tax owed by one dollar, making a tax credit a better deal than a tax deduction.

Rehabilitation Tax Credits are dollar-for-dollar reductions in income tax liability for taxpayers who rehabilitate certified historic buildings. Credits are available from both the federal government and the Commonwealth of Virginia. However, the federal Rehabilitation Tax Credit is restricted to income-producing properties.

The amount of the credit is based on total rehabilitation costs. Rehabilitation is defined as the process of returning a property to a state of utility, through repair or alteration, which makes possible an efficient contemporary use while preserving those features of the property which are significant to its historic, architectural and cultural values. Rehabilitation includes renovation, restoration, and reconstruction. It does not include enlargement, new construction, or normal maintenance.

The federal credit is 20% of the eligible rehabilitation expenses. The state credit is 25% of the eligible rehabilitation expenses. In some cases, taxpayers can qualify under both programs, allowing them to claim credits of 45% of their eligible rehabilitation expenses. However, since few HRA property owners will qualify for the federal Rehabilitation Tax Credit, only the Virginia program will be covered in the rest of this article. >MORE