Introduction to

Federal Tax Credits 

for Rehabilitating Historic Buildings

Main Street

Commercial Buildings

•	 Do you own a commercial building located in a historic district?

•	 Does it need to be fixed up?

•	 Will it be used for a business or rental housing?

If you answered YES to all three questions, then you should be aware of a program that offers significant federal tax incentives 

for rehabilitating historic buildings.

The Program 

Administered by the National Park Service in conjunction 

with State Historic Preservation Offices (SHPO), the Federal 

Historic Preservation Tax Incentives program offers a 

20% federal tax credit for qualified rehabilitation expenses. 

Thousands of property owners across the country have 

already utilized these tax incentives to rehabilitate historic 

commercial buildings and similar properties.

Why does the program exist?

Recognizing the importance of preserving our building 

heritage and the need to encourage the rehabilitation of 

deteriorated properties, Congress created in 1976 federal tax 

incentives to promote historic preservation and community 

revitalization. These tax incentives have successfully spurred 

the rehabilitation of historic structures of every period, size, 

style, and type.

Tax Credit Basics

•	 In general, a tax credit is a dollar-for-dollar reduction in 

the amount of taxes you owe.

•	 The amount of credit under this program equals 20% of 

the qualifying costs of your rehabilitation.

•	 A project must be “substantial” in that your qualifying 

rehabilitation expenses must exceed the greater of $5,000 

or the adjusted basis of the building.

•	 Your building needs to be certified as a historic structure 

by the National Park Service.

•	 Rehabilitation work has to meet the Secretary of the 

Interior’s Standards for Rehabilitation as determined by 

the National Park Service.

The process is straight-forward, and the tax savings can be 

significant. For example, a property owner planning a project 

estimated to cost $60,000 could realize a tax credit of $12,000 

on their federal income taxes.

Applicants are encouraged to consult their accountant or tax 

advisor to make sure that this federal tax credit is beneficial to 

them. For additional information on the Historic Preservation 

Tax Incentives visit the website of the National Park Service 

at www.nps.gov/tps/tax-incentives.htm.

National Park Service

U.S. Department of the Interior

Technical Preservation Services

Monroe, MI 1910. Awnings were a prominent building feature on 

many of America’s Main Streets. Photo: Walter P. Reuther Library, 

Wayne State University.
First: Does your building contribute to a historic 

district recognized by the National Park Service? 

The easiest way to determine if your building is located in 

a historic district is to contact your local historic district 

commission, municipal planning office, or State Historic 

Preservation Office (SHPO). Recognized historic districts, 

for purposes of federal tax credits, include those listed in 

the National Register of Historic Places (maintained by the 

National Park Service) and certain local historic districts that 

are certified by the National Park Service. Over one million 

buildings are already listed in the National Register, either 

individually or as part of historic districts.

If your property is located in one of these districts, it still must 

be designated by the National Park Service as a structure that 

contributes to the historic character of the district and thus 

qualifies as a “certified historic structure.” Not every building 

in a district is contributing. For example, when historic districts 

are designated, they are usually associated with a particular 

time period, such as “1820 to 1935.” In this case, a building 

constructed in 1950 would not contribute and would not be 

eligible for a 20% rehabilitation tax credit. Within this same 

district, an 1892 building might not contribute to the historic 

character if it was almost completely changed in the 1950s. 

Second: Will your rehabilitation be “substantial”? 

The cost of a project must exceed the greater of $5,000 or 

the building’s adjusted basis. The following formula will 

help you determine if your project will meet the substantial 

rehabilitation test:

A - B - C + D = adjusted basis

A = purchase price of the property

B = the part of the purchase price attributed to the land cost

C = depreciation taken for an income-producing property

D = cost of any capital improvements made since purchase

For example, Mr. Dillon has owned a downtown building for 

a number of years. He originally purchased the property for 

$150,000, and of that purchase price $40,000 was attributed to 

the cost of the land. Over the years, Mr. Dillon has depreciated 

the building for tax purposes by a total of $60,000. He 

recently replaced the roof at a cost of $8,000. Mr. Dillon’s 

adjusted basis would be $58,000. Since he intends to spend 

$60,000 to fix a leaking basement wall; upgrade the heating/air 

conditioning systems; and repair the deteriorated storefront, 

the rehabilitation would qualify as a substantial project. If 

he completes the application process and receives approval, 

Mr. Dillon will be eligible for a 20% credit on the cost of his 

rehabilitation, or a $12,000 credit. 

Three Steps 

to Determine if a Project is Eligible for Tax Credits

Some expenses associated with a project may not qualify for 

the tax credit, such as an addition off the back of the building, 

new kitchen appliances, or paved parking.

Third: How does your project become “certified”?

To qualify for the tax credits you need to complete a 3-part 

application. In Part 1 of the application, you provide 

information to help the National Park Service determine if 

your building qualifies as a “certified historic structure.” In 

Part 2, you describe the condition of the building and the 

planned rehabilitation work. The proposed work will be 

evaluated based on the Secretary of the Interior’s Standards 

for Rehabilitation – a set of 10 widely accepted standards of 

practice for historic preservation. Part 3 of the application is 

submitted after completion of the project and is used by the 

National Park Service to certify that the project as completed 

meets the Standards and is a “certified rehabilitation.” 

The three parts of the application should be completed in 

order. You will need to submit 2 copies of each part to your 

SHPO. One copy will be forwarded by the SHPO with a 

recommendation to the National Park Service, which will 

issue the final decision for each part of the application. You 

are strongly encouraged to submit Part 2 before beginning 

work, because if your initial project proposal does not meet 

the Standards, you still have the opportunity to modify the 

plans and avoid incompatible work. 

To learn more about the Standards, visit the National Park 

Service website at www.nps.gov/tps or contact your State 

Historic Preservation Office (SHPO).

Retaining historic character: The historic tin ceiling was retained 

during the rehabilitation for this Main Street clothing store. 
The Application

The Historic Preservation Certification Application (NPS Form 10-168) consists of 3 parts. This form can be downloaded 

from the web at www.nps.gov/tps/tax-incentives/application.htm.

Part 1 of the application is a request to obtain a determination by the National Park Service that your building is a “certified 

historic structure.” You will need to describe the physical appearance of the exterior and interior of the building, submit 

photographs, and provide a brief narrative on its history and significance to the historic district in which it is located. Part of 

this information is likely contained in the National Register Nomination for the district, which should be available from your 

local historic district commission, municipal planning office, or SHPO.

The photograph above shows the building 

described in the sample application prior to the 

rehabilitation work. Below left, the building is 

shown after its successful rehabilitation. 

Fill out this form until all aspects of your project 

are fully described. Be sure to indicate details 

like proposed finishes (drywall, plaster, etc.) and 

planned methods of repair.

HISTORIC PRESERVATION CERTIFICATION APPLICATION

PART 2 – DESCRIPTION OF REHABILITATION

Property name NPS Project Number

Property address

5. Detailed description of rehabilitation work Reproduce this page as needed to describe all work or create a comparable format with this information. 

Number items consecutively to describe all work, including building exterior and interior, additions, site work, landscaping, and new construction.

Number Feature Date of Feature

Describe existing feature and its condition

Photo numbers Drawing numbers

Describe work and impact on feature

Number Feature Date of Feature

Describe existing feature and its condition

Photo numbers Drawing numbers

Describe work and impact on feature

Houseal Building

316 Main Street, City, State

 1 Brick Facade 1890

The building is constructed of red brick. It has been painted white sometime after the period of

significance for the district. There is some brick spalling and a number of degraded mortar joints.

The parapet cap was covered in Portland cement in a prior rehabilitation; there is some brick

damage.

1-4 A-1

The paint will be removed from the brick following the guidance found in Preservation Brief 1:

Assessing, Cleaning, and Water–Repellent Treatments for Historic Masonry Buildings, using the

gentlest means possible. The mortar joints will be repaired using a mortar that matches the

composition and appearance of the historic. All work will be done in accordance with the

guidance found in Preservation Brief 2: Repointing Mortar Joints in Historic Masonry Buildings.

Any replacement bricks required for repairs will match the historic appearance. The Portland

cement and top course of brick will be removed; a new brick course and copper parapet cap will

be installed.

 2 Storefront c. 1960

The storefront system is a replacement consisting of two symmetrical recessed entrances with

large plate glass display windows set in aluminum frames. Metal siding encases the bulkhead

and columns. The entrances are paired aluminum and glass doors. There is a canvas awning

across the width of the building.

1-4, 7, 8 A-1, A-1.2

This current storefront system will be replaced with a more historically compatible storefront. The

brick bulkhead will be restored and a wooden storefront system that includes a transom will be

installed. The two recessed entries will be retained in form. The paired doors will be replaced

with a single wide glass door set in a wood frame. A new smaller retractable awning will be

installed in a manner to reveal the decorative belt course above.

HISTORIC PRESERVATION CERTIFICATION APPLICATION

PART 1 – EVALUATION OF SIGNIFICANCE

Property name NPS Project Number

Property address

5. Description of physical appearance

Date of construction Source of date

Date(s) of alteration(s) Source of date

Has building been moved?  no  yes, specify date

6. Statement of significance

7. Photographs and maps. Send photographs and map with application.

Houseal Building

316 Main Street, City, State

The Houseal Building is a symmetrical two-story painted brick commercial building. The display windows are large 

plate-glass windows set in aluminum frames and have a metal-sided bulkhead. Each storefront has a recessed 

entry, with a pair of glass and aluminum doors circa 1960.

The segmented arched window openings on the second floor have had their sashes removed some time ago and 

have been boarded up with plywood. There is a simple three brick course cornice with a tall parapet wall. Above 

the cornice, “HOUSEAL BUILDING” is applied in painted wood letters.

The first floor interior consists of one large open space with structural posts running down the middle of the room, 

and an enclosed bathroom in the back right corner. It has wood floors and plaster walls. A dropped ceiling system 

obscures the original pressed metal still in place. A staircase along the left wall provides access to the second floor. 

The second floor interior has deteriorated due to water damage and has warped wood floors and plaster falling off 

the brick walls. Two rows of structural posts run from the front of the building to the rear and evidence indicates 

that there were historically two residential or office spaces separated by a central hallway.

c. 1890 City Directories, Sanborn Fire Insurance Maps

Late 1940’s, 1960’s

The Houseal Building, a contributing building to the Downtown Historic District, is representative of the town's late 

19th century commercial development and is within the district's period of significance, which ends in 1942. The 

building retains both its integrity of materials and historic form. The addition of aluminum doors and display 

windows occurred outside the period of significance of the district.
Part 2 of the application is where you describe the condition of the building prior to rehabilitation and the proposed work. 

Three forms of information are needed: a description or narrative for each main building feature (see sample left, below); 

ample photographs showing the condition and views of the property prior to beginning work (exterior and interior as well 

as the surrounding site); and architectural plans or drawings that include existing floor plans and proposed changes. If no 

work is planned for a major feature (such as windows, roof, 2nd floor plan, etc.), include a statement to that effect in the 

application and still provide photographs.

You are strongly encouraged to submit Parts 1 and 2 during the early planning stages of the project. This provides the 

opportunity to make changes with minimal inconvenience or additional expense if some aspect of the work is determined 

not to meet the Standards for Rehabilitation. Completing work without Part 2 approval may result in incompatible work and 

denial of your project.

Part 3 of the application is a Request for Certification of Completed Work. This is a presentation of the finished rehabilitation 

and, once approved by the National Park Service, serves as documentation to the Internal Revenue Service that your project is 

a “certified rehabilitation.” Approval of the Part 3 application is a condition for obtaining federal rehabilitation tax credits.

Material and information to provide in your application 

include:

• historic district map

• site plan 

• photographs

• floor plans

• elevation drawings (if exterior changes are planned)

On a copy of the historic district map, indicate where your 

building is located.

Photographs are essential in conveying what the building 

looks like prior to your rehabilitation. Think of the pictures as 

providing a “virtual tour” of your property. Include pictures 

showing each exterior side, the building’s relationship to 

surrounding structures, and close-ups of such primary 

exterior features as display windows, doors, and other 

character-defining features. On the interior, provide views 

of the main spaces on each floor, and include details like 

decorative ceilings, stairs, interior doors, and window trim. 

Document deteriorated conditions, such as crumbling 

brickwork or water stained plaster. 

Number each photograph on the back and write the building’s 

address and a brief description of the image. Include a floor 

plan with the number of each photograph and an arrow 

pointing in the direction it was taken. Please indicate if the 

image is pre- or post-rehabilitation.

Elevation drawings often will be needed where major 

changes to the exterior of the building are planned. For 

example, a drawing should show the size, design, and details 

of a proposed new storefront. Floor plans of the existing 

room layouts are important and, where changes are proposed, 

floor plans showing the new layout are needed as well. 

Supplemental material may also be helpful in describing your 

project. For example, product literature or a simple sketch 

might best detail a new side entrance door.

Remember that the SHPO and National Park Service 

reviewers who will be evaluating the application will probably 

be seeing your building for the first time through the material 

you provide. Your application should communicate: (a) the 

appearance of the building prior to beginning work; (b) the 

building’s condition on both the interior and the exterior 

prior to work; and (c) your proposed rehabilitation work. 

Photo Documentation

Good quality photos (4 x 6 or larger) are needed. 

If using digital images, print in high-resolution on 

photo quality paper. Images printed on regular copy 

paper are discouraged due to the general lack of 

clarity and detail.

Label and number each photo and reference it in the 

application. In addition, key the picture to a floor 

plan with an arrow indicating the direction in which 

it was taken. 

Photo 3, Pre-Rehab

2147 Hamilton Rd.

City, State

Front facade with cornice 

detail and mismatched mortar 

used in earlier repointing.

Example: Photo and label on reverse side.

Describing Your Project
Besides the storefront, windows on the upper floors and 

the roof cornice usually help define the historic character 

of small commercial buildings. Repair historic windows 

when possible, adding exterior or interior storm windows as 

needed. If the historic windows are beyond repair, suitable 

replacements are ones that match the appearance and 

materials of the old units. 

Depending on the level of historic integrity, the interiors 

of Main Street commercial buildings on both the upper 

and lower floors often contribute to the historic character 

through their historic spaces, features, and/or finishes. Main 

Street buildings typically had a large open floorplan on all or 

part of the first floor, making it easily adaptable to numerous 

uses. While retaining the open plan is recommended, it may 

be possible to divide portions of the space, provided the 

sense of openness is preserved. Many commercial buildings 

retain their historic decorative ceilings, such as pressed 

metal, and their finished walls. These finished appearances 

should not be dramatically altered. Throughout the building 

avoid the removal of plaster to expose masonry walls or 

removing a pressed metal ceiling to expose the above floor 

joists. In most cases, mechanical ductwork is best concealed, 

rather than being left exposed, since exposed mechanicals 

can visually impact a historic space. Where ducts must be 

exposed, they should be painted to blend in with the ceiling.

When more floor space is needed, it is often possible to 

add to the rear of Main Street buildings and still qualify 

as a “certified rehabilitation.” Rooftop additions to most 

small commercial buildings are not appropriate. While 

costs associated with new additions are not eligible for 

the rehabilitation credit, the work is still reviewed by the 

National Park Service.

The Historic Rehabilitation Tax Credit Program was created to 

encourage the rehabilitation and re-use of historic structures 

while preserving the historic character of individual buildings 

and districts. Many historic districts in small towns and 

cities have Main Streets of small shops and other commercial 

buildings, typically one to four stories high. The variety of 

architectural styles reflects the popular taste of different eras 

and the image an entrepreneur wanted to project. 

The commercial storefront is usually one of the most significant 

elements of a Main Street building. In its simplest form, a 

storefront traditionally consisted of several display windows in 

a wood or metal frame, set above a bulkhead and below a glass 

transom, and an entranceway to the store on the first floor. It 

was also common for a second doorway to be located on one 

end of the storefront to provide access to the floors above. A 

sign and a canopy or awning often embellished the storefront. 

When the historic storefront has survived largely unaltered, it 

should be repaired whenever possible, rather than replaced, 

in order to preserve both the historic appearance and historic 

materials. Similarly, a later storefront installed during the 

historic district’s period of significance that may have acquired 

significance in its own right should be repaired. Where the 

existing storefront is not significant or has deteriorated beyond 

repair, the following guidance applies, in most cases, when 

designing a compatible replacement (for further guidance see 

Preservation Brief 11: Rehabilitating Historic Storefronts): 

•	 Relate the new storefront to the design of the building.

•	 Correctly proportion display windows so as to consist 

predominantly of glass, typically with a transom above 

and bulkhead below. 

•	 Retain, where possible, the location of the historic 

storefront entrances and any separate outside entrance 

to the upper floors. Duplicate the historic doors or 

replace with doors that are sized to the opening. (This 

usually requires a custom-made door to achieve the 

necessary height and width; avoid doors that have a 

residential appearance.)

•	 Ensure that replacement storefronts that aim to 

recapture the historic design are finished so as to be 

consistent with the historic appearance.

•	 With non-historic or replacement storefronts of a 

compatible design, avoid unpainted wood surfaces as 

well as in most cases bright metallic or bronze anodized 

metal finish. 

•	 Design and attach signage and any canopies in a 

manner so as to avoid damage to the historic material 

and to be compatible with the features and appearance 

of the building facade. 

Rehabilitating Your Main Street Building

Drawing courtesy of Winter & Company

Transom

Display 

Windows

Bulkhead

Storefront 

Cornice

Recessed 

Entry

Arched Head 

Windows

Building Cornice

Typical Storefront Details
This booklet was prepared by Daniel Bruechert, Technical Preservation Services Branch, Heritage Preservation Service, National Park Service, with 

the assistance of Charles Fisher, National Park Service. Thanks are extended to Elizabeth Creveling and Jennifer Parker of the National Park Service 

for their collaboration and Michael Auer for his review. All photographs are from National Park Service files unless otherwise indicated. 

First-time user guides for owners of small buildings interested in the federal rehabilitation tax credits are prepared pursuant to the National 

Preservation Act, as amended, which directs the Secretary of the Interior to develop and make available information concerning the preservation of 

historic properties. This and other guidance on rehabilitating small buildings can be found on our web site at www.nps.gov/tps.

Revised 2012

How is a tax credit different from a deduction?

A tax credit usually saves you more in income tax. Unlike a 

deduction, which reduces your taxable income, a credit is a 

dollar-for-dollar reduction in the amount of taxes you owe.

Can I receive federal tax credits for fixing up my personal 

residence?

In general, the tax credits are not available for rehabilitating 

your personal home. If you live in the upper floor and rent 

out the first floor, the money spent on rehabilitating the 

rental portion can be used, provided you meet the adjusted 

basis test. Contact your State Historic Preservation Office 

(SHPO) to determine the availability of any state credits or 

other tax incentives for personal residences. 

If I have already begun my project, is it too late to get

the credit?

As long as your building is in a registered historic district and 

you submit your Part 1 of the application prior to completing 

the project, then you may apply for the tax credits. However, 

you are strongly encouraged to submit rehabilitation plans 

(Part 2 of the application) prior to construction. In doing so, 

you ensure that any required changes are identified early 

and the resulting cost and inconvenience are minimized. 

Can anyone help me through this process?

Help is available through a variety of resources. SHPOs and 

local historic preservation organizations, including state 

or local Main Street programs, are the best place to begin 

if you have questions. Advice is available on the National 

Park Service website (www.nps.gov/tps/) or through many 

SHPO websites. Some people choose to hire a professional 

consultant, but for most small Main Street projects owners 

complete the process themselves.

How long does it take to get approval of my proposed 

project? 

You should submit your rehabilitation plans (Part 2 of the 

application) well in advance of beginning work – many states 

recommend six months prior – to allow time if additional 

information is needed by the SHPO or National Park Service. 

When original submittals contain sufficient information, 

reviews by the NPS are generally completed in 30 days, once 

received from the SHPO.

When can I claim the tax credit?

A credit may be claimed in the same year the building 

is placed in service. Where the building is never out of 

service, the credit is usually taken in the year in which the 

rehabilitation is completed. 

How are the Federal and local reviews different?

Local commissions develop their own guidelines that are 

particular to the district and the community’s preservation 

goals. Under the Federal tax credit program, the Secretary 

of the Interior’s Standards for Rehabilitation are applied 

uniformly to projects from across the country. Work on 

both the exterior and the interior of a building is reviewed 

by the SHPO and NPS, while local review commissions 

generally only consider exterior work. 

Are there any application fees?

It depends on the cost of your project. For information on 

current fees, visit our web site at www.nps.gov/tps/taxincentives/application-process.htm.

To locate your State Historic Preservation Office visit www.

ncshpo.org

Approval by the National Park Service for purposes of federal tax 

credits is a separate and different process from that of approval 

by a local architectural review commission for purposes of 

obtaining a certificate of appropriateness. 

Frequently Asked Questions