“This Old House” Can Get You a Tax Credit
By Bob Guldin
If you own a home in the historic preservation district of Takoma Park, and you have exterior work done on the house, you may be eligible for a sizeable tax credit from Montgomery County or the State of Maryland …. or maybe even both.
What’s more, Montgomery County in 2013 boosted the size of the tax credit it offers. For many years, you could get a credit of 10 percent of the amount you had spent. That has now increased to 25 percent. For example, if you spend $4,000 for a new roof this year, the county can reduce your 2016 tax bill by 25 percent of that or $1,000.
The idea behind these tax benefits is to encourage homeowners and commercial property owners to keep older buildings in good repair and to preserve the character of older neighborhoods.
A considerable portion of Takoma Park falls within the historic district. That includes most of North Takoma, the Old Takoma/PEN neighborhood, and the WACO or Westmoreland neighborhood, as well as a long strip of Carroll Avenue that reaches from Laurel Avenue to Sligo Creek Park.
To get a precise reading of what is included in our historic district (and other historic districts in the county), go to www.montgomeryplanning. org/gis/interactive/historic.shtm. You’ll find an interactive map that shows both the county and state historic districts. These overlap but are not exactly the same. On the map, you’ll see the county historic district in red and the state historic district marked with purple crosshatching. Zoom in or use the search window to find a specific property.
Here’s how the county credit works (and this writer has actually received these credits, so we know they’re real). The county credit is for exterior work only, like painting, repair or restoration, e.g., putting in new windows that look similar to your old windows. Remodeling work, like rebuilding a porch or a fence, may be eligible for the tax credit if you get a Historic Area Work Permit from the county before getting the remodeling done. The work must cost at least $1,000 in a calendar year, and you must have before and after photos and receipts or canceled checks from a licensed contractor.
You should apply to the county by April 1, 2016 for work done in 2015 to get your tax credit on time. According to Kevin Manarolla, a staffer with the Montgomery County Office of Historic Preservation, the county will generally consider applications for the previous two years.
The Maryland Tax Credit
The Maryland State homeowner tax credit — a separate program from the county one — can cover as much as 20 percent of your costs. It is possible to combine county and state credits. Add those together and you could get an impressive 45 percent reimbursement for your out-of-pocket expenses.
For the state program, the owner must spend at least $5,000 on eligible work in a 24-month period. There’s also a $50,000 cap on how big a tax credit can be.
The state program, run by the Maryland Historical Trust, differs from the county’s in several ways. For instance, to get a state credit, you must get a Historic Area Work Permit (i.e., prior approval) before work begins. The state also covers both exterior and interior work, such as refinishing floors or HVAC.
Collin Ingraham, the administrator of the state program, indicated that the first step a property-owner should take is to make sure their home is eligible for the state tax break. “Each historic designation is different,” he said. Another complicating factor: A property may be eligible for a state tax credit even if it is not in a historic district if the building itself contributes to the historic character of the neighborhood.
The state and county also differ in how they make the tax credit money available. Montgomery County subtracts it from the property tax you owe. The state applies the credit to your next income tax return.
Clearly, anyone who hopes to get a state tax credit should contact the Maryland Historic Trust (410-514-7600) very early in the process. You can find a useful fact sheet at http://mht.maryland.gov/taxcredits_homeowner.shtml.
Lorraine Pearsall, the vice president of Historic Takoma, urges residents, “Don’t be afraid to use the state tax credit, even though there are three forms and it makes people go cross-eyed.” She says her organization is ready, willing and able to help neighbors navigate the process and obtain the historic tax credits. Pearsall can be reached at firstname.lastname@example.org.
This article appeared in the October 2015 edition of the Takoma Park Newsletter. The Takoma Park Newsletter is available for download here.