Heritage Structure Rehabilitation Tax Credit

Description:
A credit of up to $3 million may be allowed for substantial expenditures incurred in a 24-month period to rehabilitate a certified heritage structure located in Maryland. The credit is available for owner-occupied residential property, as well as income-producing property. Most forms of state or local government resources cannot be used to finance a rehabilitation project.

To qualify for the credit:

• Submit a Heritage Preservation Certification application to the Maryland Historical Trust (MHT).
• Rehabilitate a certified heritage structure located in Maryland.
• Spend at least $5,000 for owner-occupied residential property. For all other property, spend more than the adjusted basis of the structure or $5,000, whichever is greater.
• After certification by the MHT, the approved form will be returned. A copy of Part 3 of the certification must accompany the Maryland income tax return.
• File Maryland Form 502, 505 or 515 to claim the credit. The credit cannot be claimed on short form 503.
• Complete the appropriate areas of Form 502H and Form 502CR, Parts H and J.

How the credit is calculated:
The credit is based on the lesser of $3 million or 20 percent of the total expenditures incurred during the taxable year.

Subsequent non-qualifying work done to the structure may require the recapture of a portion of any credits allowed in previous tax years. If an application for the rehabilitation of a commercial structure was submitted to the MHT on or before February 1, 2002, the credit allowed is 25 percent of approved expenditures and is not subject to the $3 million limitation. Structures other than owner-occupied single-family residential structures are considered commercial for purposes of this credit.

If the credit is more than the tax liability:
Credit for a rehabilitation certified after June 30, 2001 may be refunded if the credit exceeds the state tax liability and the structure is located in Maryland. Credit may only be carried forward to succeeding years if it is for a rehabilitation certified before July 1, 2001 for a structure located in Maryland, or before July 1, 2002 for a structure located in another state other than Maryland.

Subject to MHT approval for postponement, commercial rehabilitation certified between July 1, 2004 and June 30, 2007 must be completed in the fiscal year following the fiscal year in which the initial certificate was issued; commercial rehabilitation certified after June 30, 2007 must be completed within 30 months from the date of issuance of the initial certificate.

Documentation required:
Copies of Form 502CR, 502H and certification from the MHT (Part 3) must be mailed with the Maryland return.

For more information, contact:

Maryland Historical Trust

100 Community Place

Crownsville, MD 21032-2023

(410) 514-7626

(800) 756-0119

goodrow@dhcd.state.md.us

Complete list of personal income tax credits