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Tax Relief for Preserving Historic Homes

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City of Houston program helps old neighborhoods.
By Karen Derr

If your home is designated as an historic landmark, a protected landmark, or simply as a “contributing structure” in one of Houston’s 19 historic-district neighborhoods, you may be able to get some tax relief for preserving or renovating your home. (For the current list of Houston’s historic-district neighborhoods, Google “Houston Historic Districts.”)

Although there are some government hoops to jump through, good record-keeping and a little patience could get you a generous tax exemption for 15 years.

According to Ketan Inamdar with the Mayor’s Office of Economic Development, the City gets an average of 18 applications for the historic-site tax exemption per year. 161 properties have received the exemption since 2001. To apply, applicants must document their restoration work and provide proof of expenditures with invoices, a notarized General Contractor Agreement, and proof of payment. This can include cancelled checks, bank statements with copies of non-cancelled checks, credit-card receipts, and the statement from your general contractor stating payment in full. Homeowners have five years to complete their application and submit the proof-of-payment documents.

If your eyes are glazing over right about now because this all sounds too complicated, it’s really not. (Remember, you’ve got five years to get your application approved after you incur the preservation expenses.) Let’s say your home is located in one of the city’s 19 historic districts and is valued on your tax bill at $350,000, with $250,000 of that value assigned to the lot’s value. That means the value assigned to your structure (the “historic improvement”) is $100,000. If you spend a minimum of $25,000 (in this scenario) on allowable restoration and preservation expenses to the house, you’re looking at a $25,000 tax exemption on your City taxes. That’s $25,000 that the City would not automatically add to your home’s value and collect taxes on for 15 years. If you’re doing a major renovation job—up to $100,000 in this scenario—the savings really start to add up.

Houston Heights residents Donna Buchanan and Dan Hogan did a major renovation to their circa 1912 home in 2010. Buchanan bought the house in 1998, and when the couple decided to renovate and enlarge it in 2009, Hogan began researching the exemption. The allowable preservation/renovation expenses they were planning totaled more than the minimum amount required (currently 25 percent of the structure’s value), so they knew they were eligible to apply. Homeowners may be granted an exemption for up to 100 percent of the value of the structure, depending on how much they spend out-of-pocket. The money spent must be for approved preservation and restoration of the exterior, and certain elements of the interior such as the walls. The ordinance explicitly excludes things like countertops, so don’t get your hopes up about getting those granite countertops tax-free. The value of the land is excluded from the exemption, but the good news is that land value is also excluded when you figure your 25 percent minimum expense target.

Of course you can lose the exemption and possibly have to repay the saved taxes if you don’t comply with the historic restrictions for renovating “landmark” or “contributing” historic properties, or if your taxes become delinquent.

Is this tax break worth all the accounting and coordination with the City of Houston? Buchanan says it was for her and Hogan. “We realize a tax savings on our City taxes of about $2,600 per year, and the exemption can be transferred to future owners. That will be over $31,0000 in savings over the course of the 15 years.”

To find out more about this underutilized tax exemption, you can go to  houstontx.gov/ecodev/historic_site_tax_exemption.html or contact Ketan Inamdar with City of Houston’s Mayor’s Office of Economic Development at [email protected].

Karen Derr is a Houston-area Realtor and the founder of  Karen Derr Realty. She writes and speaks about home and small-business topics.

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Karen Derr

Karen Derr is a Houston-area Realtor and the founder of Boulevard Realty. She writes and speaks about home and small-business topics.

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