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Tax reform brings changes to real estate rehabilitation tax credit

Certified Public Accountant in Houston

The rehabilitation tax credit offers an incentive for owners to renovate and restore old or historic buildings. Tax reform legislation passed in December 2017 changed when the credit is claimed and provides a transition rule:

  • The credit is 20 percent of the taxpayer’s qualifying costs for rehabilitating a building.
  • The credit doesn’t apply to the money spent on buying the structure.
  • The legislation now requires taxpayers take the 20 percent credit spread out over five years beginning in the year they placed the building into service.
  • The law eliminates the 10 percent rehabilitation credit for pre-1936 buildings.

A transition rule provides relief to owners of either a certified historic structure or a pre-1936 building by allowing owners to use the prior law if the project meets these conditions:

  • The taxpayer owned or leased the building on January 1, 2018, and the taxpayer continues to own or lease the building after that date.
  • The 24- or 60-month period selected by the taxpayer for the substantial rehabilitation test begins by June 20, 2018.
  • Taxpayers use Form 3468, Investment Credit, to claim the rehabilitation tax credit and a variety of other investment credits. Form 3468 instructions have detailed requirements for completing the form.

Source: IRS

Alfredo Gaxiola has worked on numerous IRS problem cases and has successfully settled with the IRS to release liens on houses, bank accounts and wages and, if needed, setting a payment installment plan that is not burdensome for the client. He has conducted appeals before the U.S. Tax Court and obtained favorable resolutions in reducing the tax debt of his clients. Mr. Gaxiola served as Treasurer of Camara de Empresarios Latinos, one of the largest and strongest Hispanic organizations in the city of Houston. He has conducted financial and accounting seminars for the Houston Small Business Development Corporation, as well.

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Certified Public Accountant in Houston.

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