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work you do to your barn may qualify you to use a federal investment tax credit.
Here’s a simplified summary of the incentive programs.
1. IF
your barn is historic and considered income-producing and the work meets
the substantial rehabilitation test and the work is approved
at the state and federal level as being consistent with the character of the structure,
THEN you may be able to use tax credits in the amount of up to 20% of the rehabilitation
cost.
a. To qualify as historic
means that the barn is one of two things – either it is individually listed
on the National Register of Historic Places or is a contributing part of a National
Register-listed farmstead district. (While it does not need to be on the National
Register when the project starts, your application needs to be submitted prior
to completion of the project and the building needs to be listed within 30 months
of the project completion.)
b. To qualify as income
producing, it may have a function (such as storage of produce, equipment or materials)
that is part of a business, either commercial or industrial or rental residential.
c. To qualify as substantial
rehabilitation the work must take place during a 24-month period (or a 60-month
period if special conditions are met) and cost the larger of the two following
amounts: either it must be $5,000 minimum OR an amount greater than the “adjusted
basis” of the building. The “adjusted basis” of the building
is the amount paid for the structure (apportioned to this structure if the purchase
included more than one structure), minus the value of the land, minus the value
of any depreciation already taken on the structure, plus the cost of any improvements
already made to the structure.
d. To have the work approved,
it needs to follow the recommendations in the Secretary of the Interior’s
Standards for Rehabilitation and Guidelines for Rehabilitating Historic Structures
(http://www.nps.gov/history/hps/tps/standards/rehabilitation.htm)
and Preservation Brief #20 (http://www.nps.gov/history/hps/tps/briefs/brief20.htm)
and you need to provide before photos with a descriptive application plus finish
photos with a final application to the State Historical Society of Iowa for review
and recommendation to the National Park Service in Washington, DC.
e. To use the rehabilitation
tax credits, where the amount is 20% of the qualified rehabilitation expenditures,
you would file form 3468 with your federal income tax return and attach your approved
final application to the form. Then, depending on your tax circumstances, the
amount of tax credits could reduce the amount of taxes that you owe the federal
government by an equal amount. The ability to use tax credits is affected by active
versus passive income, alternative minimum tax, passive losses, adjusted gross
income caps, type of ownership entity and, of course, amount of taxes owed.
Example: For a $10,000
roof and sill repair project, you might reduce your federal taxes by $2,000.
2. IF
your barn is “non-historic” but built before 1936 and
it is used for income production through commercial or industrial means and the
cost of the project is considered substantial and it has never been moved and
it meets a specific physical test for retention of exterior walls and interior
structural framework, THEN you may qualify for a 10% rehabilitation tax credit
for the work.
a. To qualify as “non-historic”
means that your barn is not listed on the National Register of Historic Places
nor is it a contributing part of a National Register-listed historic district.
b. To qualify as income
producing, it may have a function (such as storage of produce, equipment or materials)
that is part of a business, either commercial or industrial, but not rental residential.
Hotels however would qualify, because they are considered commercial uses.
c. To qualify as substantial
rehabilitation the work must take place during a 24-month period and cost the
larger of the two following amounts: either it must be $5,000 minimum OR an amount
greater than the “adjusted basis” of the building. The “adjusted
basis” of the building is the amount paid for the structure (apportioned
to this structure if the purchase included more than one structure), minus the
value of the land, minus the value of any depreciation already taken on the structure,
plus the cost of any improvements already made to the structure.
d. To qualify for the 10%
rehabilitation tax credit, the building must not have been moved. (A moved certified
historic structure, however, can still be eligible for the 20% credit if it has
retained its NRHP integrity.)
e. To qualify for the specific
physical test, three conditions must be met:
(1) at least 50% of the
building’s walls existing at the time that the rehabilitation began must
remain in place as external walls at the work’s conclusion; and
(2) at least 75% of the existing external walls must remain in place as either
external or internal walls; and
(3) at least 75% of the building’s internal structural framework must remain
in place.
f. To use the rehabilitation
tax credits, where the amount is 10% of the qualified rehabilitation expenditures,
you would file form 3468 with your federal income tax return. NO OTHER APPROVALS
ARE NEEDED. Then, depending on your tax circumstances, the amount of tax credits
could reduce the amount of taxes that you owe the federal government by an equal
amount. The ability to use tax credits is affected by active versus passive income,
alternative minimum tax, passive losses, adjusted gross income caps, type of ownership
entity and, of course, amount of taxes owed.
Example: For a $10,000
roof and sill repair project, you might reduce your federal taxes by $1,000.
Additional information and applications can be found on the Federal
Tax Credit section
of this Web site.
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