If you invest in a historic property and renovate it, either
with the intent of flipping it or keeping it for rental income, then there are
often a number of government subsidies and tax breaks that are available to
you. The reason for this is that cities and states want to preserve their
historical areas, rather than see them decay. In fact, it is often these
incentives that turn a borderline investment proposition into a relatively
lucrative one. This is certainly the case in Seattle, so let’s look at exactly
what incentives you can take advantage of there.
Image source: http://www.historicseattle.org/images/advocacy/IMG_2161.jpg
First of all, there is the Federal Rehabilitation Tax Credit.
This applies to qualified rehabilitation expenses for Seattle buildings that
are listed in the National Register of Historic Places – for instance, if you
are renovating a historic building in Seattle and need to hire a local plumber
such as Jim Dandy Emergency Plumbers, this could very well qualify. The
building has to have been producing an income for at least five years, but if
it has, then you could receive a tax credit equal to 20% of the total
renovation expenses. In some cases, buildings that are not on the register but
were built before 1936 may also qualify – although the tax credit is reduced to
10%.
Next, if you are the owner of a historic property, you may
also qualify for a special tax valuation of your property. This is designed to
address a situation where investors would avoid carrying out needed renovations
because the property value would go up along with the property taxes. Under
this program, you are able to deduct the full cost of renovations from the
assessed value of the property for a period of 10 years, provided that the
property qualifies for the program. However, it is important to check the
details of the program, since there are a number of conditions, such as restrictions
on the relative size of renovation costs when compared to assessed value.
In addition to these tax breaks, there are also a number of
grants that are available to offset renovation costs. For example, there is the
Landmark Challenge Grant, which provides matching funding for renovations to
deserving preservation projects. The Heritage Capital Projects Fund is also
something that you should look into, although it will only provide one dollar
of funding for every two dollars that you invest.
Aside from these tax breaks and grants, there are also a
number of other types of assistance that you can get in Seattle if you invest
in a historic building. For example, you may be able to get zoning code relief,
allowing you to do things such as convert the building to a use that is not
normally allowed in the area. However, you are not entitled to zoning code
relief – exceptions are evaluated on a case-by-case basis. Other things to look
at include building code relief, preservation easements, and transfer of
development rights – which allow you to transfer unused development rights from
one building to other nearby properties.
