Historic Preservation Tax Credit Information

Montgomery County Historic Tax Credit Program

Montgomery County’s program covers only the structural exterior. Ordinary maintenance does not require prior HDC approval, but all other work must have prior HDC approval to be eligible.

BENEFIT: 10% of eligible expenditures are refunded from property taxes paid.

Montgomery County refunds 10% of the amount expended and certified by the Historic District Commission for rehabilitation of designated contributing historic resources as a credit against property taxes paid. Exterior normal or routine maintenance is covered. Items not covered include new construction or additions, interior work or replacement of original materials with modern substitutes, such as replacement of a tin roof with asphalt shingles. 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. If the property is removed from the Master Plan for Historic Preservation or the municipal official zoning map, any unused portion of the tax credit shall immediately lapse.

Work eligible for tax credit must meet the following criteria:

1. Be certified by the Historic District Commission (HDC) as contributing to restoration or preservation of a historic site in Rockville, either individually or as a historic resource located within a historic district.
2. Be exterior work only.
3. Be undertaken with an approved Historic Area Work Permit, or be ordinary maintenance expenses that exceed $1,000 over a period of two years and are certified by the Historic District Commission. (Take before and after photos.)
4. Work must be done after the date of historic designation.
5. Work must be performed by a contractor with an approved Maryland State Home Improvement License and a Federal Tax Identification number, and a valid license issued by Montgomery County. A non-licensed “handyman” (NOT a relative) hired by a do-it-yourself property owner may also be eligible.

The Montgomery County Tax Credit Program is administered by the Montgomery County Department of Finance but Rockville property owners must submit application materials to the City’s Historic Preservation Office. Applications are reviewed by the Historic District Commission and then forwarded to the County for processing and disbursement.

Applications should be postmarked by April 1 of each year.

• Application Form and Receipts Transmittal Form
  (required for submission)

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 also covers some interior work, modernization of kitchens and bathrooms, and utility upgrades.

BENEFIT: 20% credit toward Maryland Income Tax for rehabilitation work Maryland has a goal of maintaining neighborhoods and keeping residents in older areas. Therefore, the Maryland tax credit eligibility includes utilities and interior work such as heat and air conditioning systems, upgraded electrical wiring, modern kitchens and bathrooms, and other “comfort” improvements.

Maryland will credit 20% of eligible qualified capital costs expended for rehabilitation of a certified owner-occupied or income-producing property designated as a contributing resource in a locally designated historic district or 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 HDC as a Courtesy Review before the state tax credit application is submitted to the Maryland Historical Trust.  After the Maryland Historical Trust 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 rehabilitation expenditure in a 2-year (24-month) period must exceed $5,000 for owner-occupied residential property.  For all other properties, the rehabilitation costs must exceed the adjusted basis of the structure or $5,000 whichever is greater. If the tax credit exceeds the year’s tax liability, the excess is refunded in a check. 501(c)(3) non-profit organizations are eligible for this program, as well as property owners who may not pay Maryland State Income Tax, such as military families.

For all projects:

• The credit is now 20% 
   
• All work must be approved by MHT before it begins or the project will not receive state income tax credits
   
• A filing fee is required as of July 2007 equally 1% of the estimated credit.  A $10initial filing is required with the submission of a Part I certification.
   
• The maximum credit allowed is $3 million per rehabilitation. The phased rehabilitation of the same structure or property, and the rehabilitation of multiple structures that are functionally related to serve an overall purpose are treated as single rehabilitations. 
   
• State or local grants, State tax credits, and State or local financial assistance other than loans that must be repaid at rates below State general obligation bond rates may not be counted as qualified rehabilitation expenditures in meeting the substantial rehabilitation test or in calculating the amount of the credit.
   
• Homeowners claiming the tax credit need to file Form 502CR Part H – Refundable Income Tax Credits with their Part III certification tax number and attached certification letter.

The credit may be taken only for amounts estimated on the Part 2 (plan approval) application. The Part 2 application may be amended prior to submission of the Part 3 (completed work certification) application.

Forms are available at the City of Rockville's Department of Community Planning and Development Services but the program is administered by the Maryland Historical Trust. Completed applications must be submitted to MHT. More information on the Maryland Historic Preservation tax credit program may be obtained from the MHT at 410-514-7630. Forms and assistance are available at the Maryland Historical Trust Web site.

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. It requires certification through the Maryland Historical Trust (MHT) that alterations and improvements meet The Secretary of the Interior's Standards. Persons wishing to utilize this should consult their CPA and the MHT for the best tax strategy before proceeding.

BENEFIT: 20% tax credit against federal income tax 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. The building rehabilitation must be in conformance with the Secretary of Interior’s Standards for Rehabilitation and be certified by the Maryland Historical Trust. The forms are similar to those for the Maryland tax credit and should begin with project planning and consultation with a tax professional. This program is administered by the National Park Service. More information on Federal historic preservation tax incentives is available on the National Park Service Web site.