Is your business planning to relocate, expand, or renovate a commercial property—especially one with historic value? If so, you may be eligible for the Rehabilitation Tax Credit, a powerful federal incentive that can offset the costs of improving a qualified building. At Botwinick & Co., we help businesses across industries take full advantage of available tax credits, including this valuable opportunity for historic building renovations.
What Is the 20% Rehabilitation Tax Credit?
The Rehabilitation Tax Credit allows business owners to claim 20% of qualified rehabilitation expenditures (QREs) for the restoration of a certified historic structure. These buildings must be:
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Depreciable commercial buildings placed in service before the start of rehabilitation
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Substantially rehabilitated (QREs must exceed the greater of $5,000 or the purchase cost of the existing building)
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Certified historic structures listed by the National Park Service
After rehabilitation, the building must be used for business or income production—not held for resale.
What Expenses Qualify?
To be eligible, expenses must meet the definition of Qualified Rehabilitation Expenditures (QREs). These include:
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Capital improvements directly related to restoring or reconstructing the building
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Costs associated with interior and exterior structural improvements
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Expenditures on real property only (land costs and building enlargements are not eligible)
Important: Acquisition costs, landscaping, and any additions that increase the building’s size are not QREs.
How Is the Tax Credit Applied?
Thanks to updates under the Tax Cuts and Jobs Act (TCJA), the 20% tax credit must now be claimed ratably over five years, rather than all in the year the building is placed into service. That means you can apply 4% of your QREs per year for five years, starting the year your rehabilitated property goes into service.
Even better, the credit can be used to offset both regular federal income tax and alternative minimum tax (AMT) liabilities.
Key Changes to the Credit
The TCJA of 2017 made permanent updates to the rehabilitation credit, including:
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Mandatory five-year credit allocation (no more claiming the full 20% in one year)
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Elimination of the 10% credit for non-historic pre-1936 buildings
Unlike other individual tax cuts under the TCJA, these changes to the rehabilitation credit are not set to expire after 2025—they’re here to stay.
Maximize Your Tax Savings with Botwinick & Co.
At Botwinick & Co., our experienced real estate tax advisors help clients evaluate and optimize tax strategies related to commercial property investments. Whether you’re restoring a historic downtown storefront or repurposing an industrial building, we’ll guide you through the technical requirements to ensure your project complies with federal regulations and qualifies for all available tax benefits.
We’ll help you:
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Determine if a property meets the criteria for the rehabilitation tax credit
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Identify all eligible QREs during the construction and renovation process
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Work with architects, developers, and contractors to ensure compliance with federal standards
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Explore additional tax credits related to green building upgrades, location-based incentives, or energy efficiency
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Monitor and document project costs for IRS audit readiness
Are There Other Incentives Available?
Absolutely. Depending on the building’s location and your long-term plans, you might also qualify for:
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State or local historic preservation grants or tax credits
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Energy-efficient building credits under Section 179D or the Investment Tax Credit (ITC)
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Opportunity Zone incentives, if the property is located in a designated zone
Every property and business plan is different. That’s why it’s essential to work with a tax advisor who understands the intersection of tax law, real estate, and business strategy.
Let’s Talk About Your Project
If you’re considering rehabilitating an older or historic commercial building, Botwinick & Co. is here to help you navigate the process from start to finish. We’ll ensure you capture the full value of the 20% rehabilitation tax credit—while also identifying additional savings opportunities that can dramatically improve your bottom line. Contact Botwinick & Co. today to schedule a consultation and see how your real estate improvements can lead to substantial tax advantages.
