Buying a historic home can feel like owning a piece of history — but restoring it is often more of a passion project than a financial investment. The process can bring personal fulfillment and community pride, but it rarely produces a high return. That said, there are some legitimate tax incentives and planning strategies that can help offset the cost.
Federal and State Tax Incentives
The most well-known incentive is the Federal Historic Preservation Tax Credit, which allows a 20% credit on qualified rehabilitation expenses. However, it’s important to note that this credit applies only to income-producing properties. If you plan to live in the home as your primary residence, you won’t qualify for the federal credit.
If, on the other hand, you’re converting the property into a bed and breakfast, professional office, or another income-producing use, the credit may apply. In those cases, the credit is generally taken over several years as the rehabilitation is completed.
At the state level, Virginia and many other states — especially along the East Coast — offer their own tax credits for historic restoration. Local governments and historical societies sometimes provide additional incentives, particularly if the restoration aligns with community preservation goals. These programs vary, so it’s worth contacting your local historic preservation office or historical society early in the planning process.
Planning for Specialized Costs
The most overlooked aspect of restoring a historic property is the craftsmanship it requires. These projects often demand specialized artisans — people skilled in plasterwork, traditional carpentry, historic moldings, or period-appropriate finishes.
These aren’t weekend projects or quick hardware store fixes. Finding the right craftspeople can be challenging and often means bringing in experts from outside your immediate area. That alone can push costs higher.
If you’re budgeting $800,000 for renovations, plan for an additional 20% contingency. Unique projects, from matching plaster walls to repairing stained glass or preserving painted ceilings, almost always uncover unexpected challenges.
The Role of Local Historic Societies
Your local historic society can be one of your best resources. Beyond potential funding support, these organizations often maintain lists of qualified artisans, architects, and preservation contractors. They can also help you navigate local architectural guidelines, which are often more flexible for historic properties than for newer homes.
Think of It as a Legacy Project
Even with tax credits, restoring a historic home isn’t likely to be a high-return financial investment. It’s more accurate to think of it as a legacy investment — something that connects you to your community and preserves an architectural story for future generations.
That doesn’t make it less worthwhile. It just means the motivation should come from passion, not profit. Tax incentives can help, but they’re best viewed as partial offsets for a project that’s ultimately about stewardship rather than returns.
Work With Experienced Professionals
Given the complexity and size of the project, coordination is essential. Work closely with a CPA who has experience with historic rehabilitation credits, along with your local preservation organizations and municipal officials. The rules for qualifying expenses and timing are technical, and they differ between the federal, state, and local levels.
And as always, choose experts who have been through this process before. You don’t want your first restoration — or your CPA’s first — to be the testing ground for learning how these programs work.
This post is adapted from a recent episode of the Scholar Wealth Podcast. For more perspective on historic preservation tax incentives and restoration planning, listen to the full podcast episode here.