Posted by Michael Straus and Taylor Hutton in Tax: Credits & Incentives.
If you’re looking at a sizable Virginia income tax bill this year, writing a check isn’t your only option. There’s another approach that many taxpayers don’t realize exists. Purchasing Virginia Historic Rehabilitation Tax Credits at a discount and using them to offset what you owe, dollar for dollar, could be an option. For the right situation, it’s a straightforward way to reduce the real cost of paying your state taxes.
How it Works
The Historic Rehabilitation Tax Credit is Virginia’s way of incentivizing the restoration of historic buildings. When a qualifying property is rehabilitated, the project earns a credit equal to 25% of eligible renovation costs.
Developers often generate more credits than they can use, which creates an opportunity for other taxpayers to step in, contribute capital, and receive credits in return—typically at a discount.
Individuals, corporations, trusts, and estates can all take advantage of these credits. There is currently no annual usage cap, allowing taxpayers with larger liabilities to potentially offset their entire Virginia tax bill. This can be accomplished by carrying over unused credits for up to ten years.
A developer completes a qualifying project, generates credits, allocates them to participating taxpayers, and those taxpayers apply the credits against their Virginia income tax. A taxpayer contributes $9,200 and receives $10,000 in credits, which can be used to offset taxes dollar-for-dollar.
This option is worth exploring for taxpayers facing significant Virginia tax liabilities who want a flexible, potentially cost-saving strategy.
Next Steps
If you’re considering whether historic rehabilitation tax credits make sense for your situation, our team can help you evaluate the opportunity and navigate the process. Contact Taylor Hutton or Michael Straus on the PBMares Credits & Incentives team.
Be sure to consult with your financial or tax advisor on this topic as individual situations may vary. The information contained in this article or webinar, and any related materials, are for informational purposes only, and cannot be relied upon for legal, financial, tax, accounting, or other professional services advice. The content is provided on an “as is” basis and PBMares makes no representations or warranties about the accuracy or sustainability of any information for your purposes. For any specific questions you may have, please contact us.
This content is accurate at the time of publication. Always ensure you are reviewing the most recent information available. Contact your tax or financial advisor if you need clarification.
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About the Authors
Michael Straus
CPA
Partner
Richmond
How Michael got here With a career of over 40 years dedicated to finding ways to save clients money, Michael was initially drawn to accounting for its challenges and rewards. A former CFO in the entertainment and foodservice industries, he is particularly skilled in improving company operations by streamlining tasks and increasing efficiency. As a … Continued
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Taylor Hutton
CPA, CVA
Senior Manager
Richmond
Taylor focuses on providing tax and accounting services to the firm’s not-for-profit, closely held business and individual clients. He enjoys using his problem solving skills to assist clients in solving their complex tax and accounting issues.
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