Historic Home Renovations: How You Can Take Advantage of Grants, Loans, and Tax Breaks

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Home Renovations to Historic Properties Have Their Perks

It’s undeniable that historic homes have distinctive character and architectural details you simply can’t find in a new build. While owning a 19th century Tudor or an early-20th century Craftsman is a special experience, renovating these classic beauties can come with their own set of challenges.

There’s a significant amount of time, effort, and money involved when remodeling a residential property, especially one that’s older. The good news is that there are home renovation grants, loans, and tax benefits specifically designed for pieces of real estate considered “historic.”

These resources can help offset costs and save you thousands during and after your house renovations. Keep reading to learn more about how you may be able to take advantage of incentives for your historic charmer.

What Constitutes a Historic Home?

Just because a house is old doesn’t mean it’s historic. The National Register of Historic Places is the official list that deems properties with the designation. To qualify, a structure must be an important part of American history, architecture, archeology, engineering, or culture and have integrity of location, design, setting, materials, workmanship, feeling, and association.

In addition, the building must meet one of the following criteria:

  • Associated with events that made a significant contribution to the broad patterns of our nation’s history.
  • Associated with the lives of significant and historical figures.
  • Embody distinctive characteristics of a type, period, or method of construction, or represent the work of a master, or possess high artistic values, or represent a significant and distinguishable entity whose components may lack individual distinction.
  • Have yielded, or may be likely to yield, valuable information about prehistory or history.

Generally, properties less than 50 years old won’t be considered eligible for the National Register, but there are some exceptions. Homes that make the list also must maintain most, if not all, of their historic physical characteristics.

Check out our blog “What Makes a Home Historic?” to learn more.

Home Renovation Grants for Historic Properties

Grants are typically reserved for nonprofit organizations and public properties or groups, but if you do your homework, you can discover opportunities for individual homeowners. Local, state, and national governments all offer programs that allow private owners to apply for and potentially receive money for home renovations.

To find grants available near you, start by reaching out to your area’s National Trust for Historic Preservation office. You can also contact the Kansas or Missouri State Preservation Office. PreservationDirectory.com is another great resource to learn about grant programs.

Keep in mind that there are a wide range of eligibility requirements and the approval process is highly competitive. Whether your updates involve repointing mortar or replacing siding, applicants must submit a detailed scope of work, along with several bids from house renovation companies.

Historic Home Renovation Loans

No matter if you’re planning on buying your first historic house or embarking on a long-overdue home renovation project, there are a variety of loan options to help you preserve your property, while incorporating modern functionality.

One of the most popular, an FHA 203(k) rehab loan allows you to bundle your mortgage and house renovation expenses with either a fixed or adjustable interest rate, down payment as low as 3.5%, and credit score that’s around at least 620.

Fannie Mae’s HomeStyle Renovation or Freddie Mac’s CHOICERenovation loans are excellent financing solutions for those who can put down 20% or more. These loans act similarly to the 203(k) program, but stipulate that you only need private mortgage insurance (PMI) until your equity is 20% of your home’s value. If you put down 20% initially, you can avoid this altogether.

Additionally, the Department of Housing and Urban Development offers Title 1 loans for homeowners who meet certain qualifications, making it possible to acquire an unsecured amount of $7,500 for small repairs and a maximum of $25,000.

If you own a separate primary residence or already live in a historic house that’s significantly increased in value, you may be able to take a different approach and capitalize on your home’s equity. A cash-out refinance, home equity loan, or home equity line of credit lets you use a property as collateral to borrow funds that will pay for your home renovations.

Home Renovation Tax Benefits

You may also have access to tax savings by performing a historic home renovation. Missouri’s Historic Preservation Tax Credit Program provides a credit of 25% for commercial properties and owner-occupied homes that are certified as historic structures. The Kansas State Rehabilitation Tax Credit is equal to a percentage of your qualified project expenses, which is based on the population of the city or township your property is located in. In addition, you must:

  • Submit an application before any home renovations begin
  • Own a structure listed on the State or National Register
  • Have house renovations that add up to more than $5,000

Tax benefits exist at the federal level as well, but only for income-producing rental properties and buildings rehabilitated for non-residential use. For more information about the Federal Historic Preservation Tax Incentives program, visit the National Park Service’s website.

Finally, you may be able to qualify for tax savings through a historic preservation easement, which is a voluntary legal agreement that permanently protects your property from house renovations that undermine its historic character. As part of the process, you would transfer your easement to a preservation society or conservation organization, which can reduce property, income, and estate taxes. Easements are complex, so historic home renovation professionals recommend seeking advice from a tax professional first.

Consult with a Kansas City Home Renovation Company to Discuss Your Investment Goals

When you’re ready to plan your project, it’s likely you’ll receive a range of estimates from a variety of home renovation companies. Although it’s tempting to solely focus on price, it’s not the only factor you should consider. More importantly, you want a team you’re confident can complete your historic home renovations with care.

Look for a home renovation company who specializes in classic architecture and remains committed to respecting the past, while ensuring your property is an enjoyable place to live for years to come. It’s also a good idea to peruse remodelers’ portfolios to explore some of their previous work and see if they might be a good fit for accomplishing your vision.

Reach out to a Kansas City home renovation expert to learn more about remodeling your property without taking away its history.