Tax Facts

7809 / Can property that is used for lodging qualify for the credit for rehabilitating old buildings and certified historic structures?

Updated: December 31, 2024 at 04:41 AM
Editor’s Note: The 2017 tax reform legislation continues to permit a 20 percent credit for qualified rehabilitation expenses made with respect to a historic structure. This credit is to be claimed ratably over a five-year period beginning with the tax year in which the structure is first placed in service (i.e., 4 percent each year).1 The final bill eliminated the previously existing credit for pre-1936 non-historic buildings. See Q 7808 for details.


Unless the building is a certified historic structure, a building will not qualify for the special investment tax credit to the extent it is used for lodging purposes.2 Thus, the use of a building or structure that is not a certified historic structure must be commercial or nonresidential.
Example 1. Expenditures are incurred to rehabilitate a five-story structure. The top three floors are apartments. The bottom two floors are commercial office space. The building is not a certified historic structure. The building and the rehabilitation work otherwise qualify for the tax credit. Expenditures incurred in connection with the rehabilitation of the top three floors do not qualify for the credit. However, the portion of the building’s basis that is attributable to qualified rehabilitation expenditures for the commercial part of the building is not considered to be expenditures for property used primarily for lodging. An allocation of expenditures would therefore be made in order to determine the portion of the basis that qualifies for the credit.3

Example 2. Expenditures are incurred to rehabilitate a five-story structure. Each of the five floors is an apartment. The building is a certified historic structure. The rehabilitation work otherwise qualifies for the tax credit. Because the building is a certified historic structure, the entire portion of the building’s basis attributable to qualified rehabilitation expenditures qualifies for the credit.4





1.  IRC § 47(a).

2.  IRC § 50(b)(2).

3.  Treas. Reg. § 1.48-1(h)(1)(iii).

4.  Treas. Reg. § 1.48-1(h)(2)(iv).


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