Unlock Hidden Wealth: Historic District Business Incentives Can Transform Your Smithfield Property Investment

Property owners in Smithfield’s historic district are sitting on a potential goldmine of tax savings and financial incentives that many don’t even know exist. With both Federal and State tax credits available, potentially allowing taxpayers to qualify for tax credits equal to 45 percent of eligible rehabilitation expenses—20 percent in federal credits and 25 percent in Virginia credits, understanding these programs can significantly impact your bottom line and property value.

Understanding Smithfield’s Historic District Advantages

The Smithfield, Virginia National Register of Historic Places (NRHP) Historic District was listed on both the NRHP and the Virginia Landmarks Register (VLR) in 1973. Unless tax credits at the state and/or federal level have been applied for and enjoyed by the property owner, no additional regulations impact these properties as a result of these listings. This means property owners can potentially access significant tax benefits without burdensome regulatory restrictions.

The financial impact of these programs has been substantial across Virginia. DHR has stimulated more than $4.2 billion dollars in private investments related to historic tax credit incentives, revitalizing communities of all sizes throughout Virginia, demonstrating the real economic power of these incentives.

Federal Historic Rehabilitation Tax Credits

The federal program offers a 20 percent federal income tax credit for the rehabilitation of historic, income-producing buildings that are listed in or determined eligible for listing in the National Register of Historic Places. To qualify, your property must meet specific criteria:

• The building must either be listed individually in the National Register of Historic Places, contributing to the significance of a historic district, or determined to be eligible for listing in the National Register
• The building must be income-producing. For example, it may be used as a hotel, for offices, for commercial, industrial, or agricultural purposes, or for rental housing
• The qualified rehabilitation expenses incurred during the measurement period exceed the greater of $5,000 or the adjusted basis of the property at the beginning of the measurement period

Virginia State Historic Rehabilitation Tax Credit

Virginia’s complementary state program offers even more attractive terms. The Virginia State Rehabilitation Tax Credit was established in 1997. An individual, estate, trust, or corporation incurring eligible expenses in the rehabilitation of a certified historic structure is entitled to claim a credit against their respective Virginia taxes. The credit is equal to 25% of eligible rehabilitation expenses for projects completed in and after the year 2000.

Key advantages of the Virginia program include:

• An owner occupied home may qualify, unlike the federal program
• The credit may be carried forward for up to ten years, with a $5 million cap on the amount of credits a single taxpayer can claim in one taxable year
• A building does not need to be formally listed on the registers to qualify for the State credit; a determination of eligibility is sufficient

Qualifying Expenses and Requirements

Understanding what expenses qualify is crucial for maximizing your benefits. Eligible rehabilitation expenses are those chargeable to a building’s capital account and include: Structural Components: Work on the building’s structure, such as roofing, foundation repair, and wall restoration. Systems: Installation or updating of plumbing, heating, electrical systems, and other essential services.

The threshold requirements vary by program and property type. For the Virginia State credit, eligible rehabilitation expenses must be at least 25 percent of the assessed value for owner-occupied residential buildings or 50 percent for commercial and other non-residential buildings.

The Application Process and Professional Guidance

The Historic Preservation Certification Application is a three-part application used to apply for certifications required for federal and/or state historic preservation tax incentives. To qualify for any of these tax incentives, property owners must complete the appropriate part or parts of the application. Completed applications are submitted to the State Historic Preservation Office where it is reviewed for completeness and accuracy and then sent to the NPS with its recommendation. NPS then decides if the development meets the rehabilitation standards and is eligible for historic tax credits.

Given the complexity of these programs, working with an experienced accountant smithfield property owners can trust is essential. All County Tax Resolution, based in Pennsylvania but serving nationwide, brings decades of experience in tax resolution and accounting services. Whether you’re an individual or a business with IRS and State tax problems; like a levy, lien or an audit, they offer free consultations and promise to give peace of mind that your case is going to be resolved at an affordable fee.

Maximizing Your Investment Strategy

The financial benefits extend beyond immediate tax savings. Rehabilitation of historic buildings attracts new private investment to the historic cores of cities and towns and is crucial to the long-term economic health of many communities. Enhanced property values generated by the program result in higher revenues for local and state government through increased property, business, and income taxes.

For property owners considering these incentives, timing is crucial. Applications must be filed with the state and/or the U.S. Department of the Interior prior to the completion of the project and approved in order the receive the credits. This makes early consultation with qualified tax professionals essential.

Beyond Tax Credits: Additional Local Incentives

While federal and state tax credits offer the most substantial benefits, don’t overlook local incentives. Localities often offer additional incentives, such as real estate tax exemptions. Some areas provide locality incentives (i.e. façade grant, utility tax abatement, business license abatement, etc.)

The Bottom Line for Smithfield Property Owners

Historic district property ownership in Smithfield presents unique opportunities for savvy investors and business owners. With potential combined tax credits reaching 45% of eligible rehabilitation costs, these incentives can transform marginal projects into highly profitable investments while preserving community character and history.

The key to success lies in proper planning, documentation, and professional guidance. Applicants requesting historic preservation certifications by the NPS and those interested in the use of the credits are strongly advised to consult an accountant, tax attorney, legal counsel, or the IRS as there are numerous property and tax considerations.

For Smithfield property owners ready to explore these opportunities, the combination of federal and state incentives, coupled with expert accounting guidance, can unlock significant value in historic district properties while contributing to community revitalization and preservation efforts.