Historic Tax Credits
Montgomery County Historic Tax Credit Program
The City of Rockville participates in Montgomery County’s preservation tax credit program. This program, established in 1979 under Montgomery County Code, Chapter 52, Article VI, generally covers annual exterior maintenance expenses, although structural repairs and pruning of trees away from a historic structure may also be considered. Ordinary maintenance does not require prior HDC approval, yet all other exterior work must have prior Historic District Commission (HDC) approval to be eligible.
BENEFIT: 25% of eligible expenditures are refunded from property taxes paid.
Montgomery County refunds 25% of the amount expended during the calendar year, certified by the HDC for rehabilitation of locally designated historic resources, as a credit against property taxes paid. Normal or routine exterior maintenance is covered. Items not covered include new construction, additions or interior work. Maintenance work that requires HDC prior approval, such as replacing original materials with a substitute material, such as the replacement of a tin roof with asphalt shingles, may also qualify for the tax credit with HDC approval. The tax refund credit is allowed for the tax year immediately following the year in which the work or any portion thereof is completed. Any unused portion of this tax credit may be carried forward for as many as five (5) subsequent tax years.
Work eligible for tax credit must meet the following criteria:
- The property must be designated as a historic resource in Rockville.
- Be exterior work only.
- Be undertaken with an approved Certificate of Approval, or be ordinary maintenance expenses that exceed $1,000 in any one year, and is recommended for tax credits by the Historic District Commission.
- Work must have been done after the date of the property's historic designation.
- Work should be performed by a contractor with an approved Maryland State Home Improvement License, a Federal Tax Identification number, and a valid license issued by Montgomery County.
- Labor costs of the property owner are not eligible, but expenditures for materials are allowable.
The Montgomery County Tax Credit Program is administered by the Montgomery County Department of Finance at 240-777-8931. Rockville property owners must submit application materials to the City’s Historic Preservation Division for processing. Applications are reviewed by the Historic District Commission, then forwarded to the County for final review and disbursement of the tax credit. Applications should be postmarked by April 1 of each year.
- Application Form and Receipts Transmittal Form (PDF) (include before and after photos)
More information about the program and detailed application instructions are available at the Montgomery County Historic Preservation Instructions for Filing a Tax Credit.
Maryland Historic Tax Credit Program
This program provides the greatest benefit to Historic District owners as it may include exterior and interior work, such as modernization of kitchens and bathrooms, and utility upgrades. Owner-occupied and income-producing properties may qualify for this program. Applications for owner-occupied properties are reviewed on a rolling basis; applications for income-producing properties are reviewed annually, with a single statewide deadline. All state tax credit applications are reviewed by Maryland Historical Trust (MHT) staff and applicants are advised to contact MHT early in the project planning phase to assure full consideration by the state of your application.
BENEFIT: 10%, 20% or 25% of eligible expenditures are refunded from Maryland state income taxes.
Maryland has a goal of maintaining neighborhoods, including older areas. Therefore, the state's tax credit eligibility includes interior work such as heating and air conditioning systems, upgrades to electrical wiring, installation of modern kitchens and bathrooms, and other rehabilitation improvements. Remodeling expenses, such as changing Corian countertops to granite, will not qualify, but older homes will typically require substantial rehabilitation rather than remodeling. The Maryland state tax credit applies only to properties recognized as contributing resources in a locally designated historic district and eligible for listing in the federal National Register of Historic Places, or for properties already listed on the National Register.
If the work is exterior and involves a change in the physical appearance of the exterior of the building or environmental setting, the work should be reviewed by the Rockville Historic District Commission as a Courtesy Review before the state tax credit application is submitted to the MHT. After the MHT approves the work, the project should be submitted to the HDC for a Certificate of Approval. This process is designed to streamline the needed reviews and prevent jeopardizing receipt of the tax credit. The state reviews may take up to three months for review.
More information about this program is available at the Maryland Historic Tax Credit Program website.
Federal Historic Tax Credit Program
The federal program applies only to income-producing properties, but is a substantial benefit as it is a credit toward federal income taxes owed. Qualifying building rehabilitation must be in conformance with the Secretary of the Interior’s Standards for Rehabilitation and be certified by the Maryland Historical Trust. Application forms are similar to those for the Maryland tax credit program and should begin with project planning and consultation with a tax professional. This program is administered by the National Park Service.
BENEFIT: 20% of eligible expenditures are refunded from Federal income taxes owed.
Owners of income-producing properties listed on the National Register or located in a National Register District may be eligible for a 20% federal tax credit for certified rehabilitation of income-producing historic structures such as commercial, industrial, or rental residential buildings. This credit can be combined with a straight-line depreciation period of 27.5 years for residential property and 31.5 years for non-residential property for the depreciable basis of the rehabilitated building, reduced by the amount of the tax credit claimed.
More information on Federal historic preservation tax incentives is available on the National Park Service website.