How a Historic Tax Credit works with Cost Segregation
By: Lee Shreve
Cost Segregation has been used for commercial buildings of all types, whether it be an office,
medical building, apartments, self-storage, hotels, or other building types for profit. However,
another building type applies to that list. Investors and building owners may purchase a
building in a demographic designated a historic area entitling the building owner to a tax credit
called the Historic Tax Credit (HTC) for rehabilitation work. The credit, created in 1976, can be
up to twenty percent giving the tax filer an added benefit on their tax application. The Tax Cuts
and Jobs Act of 2018 eliminated 10 % of the credit for buildings not on the historic registry but
were built before 1936.
But why stop there? Reviewing the advantages of both cost segregation and the HTC with your
tax advisor may yield an opportunity to advance more depreciation expense. Therefore, you
would keep more of your money in your pocket.
With the HTC claim, a building owner will place the credit towards the qualified real property.
At the same time, a cost segregation study calculates the percentage of the building’s cost,
which should be allocated to personal property.
As you qualify your building(s) for the HTC claim benefit, you should pursue a complimentary
preliminary analysis from CSSI to make a sound economic decision. Remember, the money is
yours. Keep more of it.