Resources & Guides

​​​​​​​​​​​​​​​​​​​​​​​​​Rehabilitation Tax Credit:

• "Rehabilitation" is work done to a historic property that meets the Secretary of the Interior's Standards for Rehabilitation. The Standards prioritize repair and preservation of histo​​​ric character, with compatible alterations to allow for contemporary use. The expenses that qualify for this program are known as "Qualifying Rehabilitation Expenses" or "QREs." A percentage of your QREs (20%, 30% or 40%) may be awarded to the property owner after the work is complete, in the form of a Tax Credit. The review of a rehabilitation project is completed by the Kentucky Heritage Council (KHC) and National Park Service (NPS), for the State and Federal Tax Credit programs, respectively. These agencies do not provide tax-related advice. 
  
  
• "Tax Credits" are dollar-for-dollar credits toward the income taxes the  property owner owes, reducing the amount of money a taxpayer must pay in income taxes fo​​r the given year. This is not a tax deduction, which reduces your income subject to being taxed. This program is a type of investment credit, which can be awarded once the completed work has been certi​fied as meeting the Standards for Rehabilitation. The issuance of the final awarded tax credits is overseen by the Kentucky Department of Revenue and IRS for State and Federal Tax Credit programs, respectively. These agencies do not provide rehabilitation-related advice.  ​
  

This program is a voluntary incentive that follows regulatory processes that are guided by codified standards of review and required submittals. All application forms are located on our Application & Forms page.​ 

First time applicant? 
We highly recommend you check out our Beginner's Video Tutorials, at the bottom of this page!

Step 1: Confirm Eligibility

​Properties must be listed on the National Register of Historic Places (NRHP), individually or as Contributors to a Historic District. Search for your property on our Preliminary Site Check Map to see its NRHP status. Have questions? Email Marty.Perry@ky.gov to get information on your property and/or the NRHP Historic District it's located within. 

State Part 1 Applications are always required. ​
Singular buildings that are individually listed on the NRHP do not need to provide a Federal Part 1 Application. 

In addition to being listed, the property must have enough integrity to convey its historic significance. The determination of eligibility is completed in a Part 1 Application. There are no State or Federal Review Fees for a Part 1 application. Part 1 Applications must be accompanied by lots of "Before Rehabilitation" photos that are keyed to a Photo-Key Plan. If work has already begun (which is never recommended), then "Current" photos must also be provided. Questions? See our "How to Photo-Document a Property" tutorial, toward the bottom of this page. 

Step 2: Define a Proposed Project

The Part 2 application is the project's Description of Rehabilitation​ and should be submitted once a project scope can be described in the application, but before you begin any of the work.​ Beginning work before a Part 2 approval is never recommended and done at the applicant's own risk. The Part 2 outlines proposed rehabilitation work, estimated costs, and may require supplemental materials and drawings for complex projects. 

Staff are attempting to visualize the changes that will take place and assess if those changes are aligned with the Standards for Rehabilitation. We do not review for code compliancy; rather, we are looking for the historic character to be visually retained. With this in mind, try to describe the existing condition, the need/desire for the change, and what the intended change will ultimately look like. Try to avoid conflicting or ambiguous language that could be interpreted incorrectly (such as: if possible, repair or replace, where needed, etc.). These descriptions do not give the reviewers an accurate or clear picture of the actual proposal and will likely require revisions.  

State Part 2 projects shall not be processed, assigned, or reviewed (and as such, shall not receive an Allocation Letter) until payment is received. State Review Fees are calculated by the Payment Portal and are based on your Qualified Rehabilitation Expenses. ​

Any work done prior to submitting and receiving an approval of the Part 2 Application is done at the applicant's own risk and may result in disqualification of the project. Retroactive applications are encourage to reach out for a preliminary review prior to submitting any applications.​

Project Review Timeline:

• All applications must be submitted electronically to our website's Application Portal (unless a Title IV accommodation has been requested). 
  
• Parts 1 and 2 are typically submitted together, although it is not a requirement. ​These application should be submitted before rehabilitation begins. Approved Part 2 applications will be alllocated funds at the end of the state's fiscal calendar. 
  
• Part 3 Applications are submitted after rehabilitation has ended. KHC reviews Federal applications and State Part 3 applications all year long. We can only award State Tax Credits to completed projects after funding has been allocated. ​
  

Allocations:

• State Part 1 and 2 applications are REVIEWED each year from JULY to the following APRIL. 
• The last day for a project to be submitted for consideration in that year's fiscal calendar is April 29th. 
  
• Approved State Part 1 and 2 Applications are ALLOCATED funds from our fiscal budget each MAY and JUNE via emailed Allocation Letters. Allocation amounts are subject to apportionment, if there are more projects approved than funding allows.
  

Once an application is submitted to our website's Application Portal (located on the main Tax Credit website), you'll receive confirmation of your materials' transmittal within 2 business days. KHC's review is typically complete within 30 days from the submittal of a complete application. For projects that also have a Federal application, there is an additional 30 day review period for the NPS to conduct their review. 

Please note: If your application is submitted in April, it is not guaranteed to be allocated funding in that fiscal​ year (May and June). Only projects that contain complete and comprehensive materials by April 29th will be considered for a Allocation Letter in that year. 

Tax Credit Programs: 

There is a State and a Federal Rehabilitation Tax Credit.
KHC accepts and reviews both State and Federal Tax Credit applications. The property's Proposed Use determines what project category and program you may be eligible to apply for. In the graph below, you'll first identify the best fit for your property's proposed use (circles). Your property's use establishes which Tax Credit program (State and/or Federal) that you may be eligible for, and the subsequent "Qualifying Rehabilitation Expenses" (QRE) requirement.   

 If you have questions about the Adjusted Basis, please reference the IRS's resources here and here!​

"Qualifying Rehabilitation Expenses" (QREs): 

Although all scopes of work are under review for a Rehabilitation​ Tax Credit project, not all of the project's expenses may qualify as QREs for a Tax Credit award. Generally, QREs are expenses that are directly tied to the rehabilitation of the historic property's structural elements. QRE are not the cost of acquisition / purchase price; site work; new construction and/or enlargements of existing structures; or the purchase of personal property (such as appliances, furniture, artwork, etc). Per KRS ​171.397(2)(b), the Kentucky Heritage Council shall make the determination of what expenses are considered QREs. While there is no definitive list of QREs vs. Non-QREs, the IRS has a guiding document​ available, here:
 ​IRS's QRE Brief.pdf

Step 3: Amend & Complete the Project

If scopes of work change from what was initially submitted in the Part 2 Application, please submit an Amendment application, describing the proposed changes. It is the applicant's responsibility to submit documentation that updates the Description of Rehabilitation, and failure to do so is at their own risk. There are no review fees for an Amendment submittal. 

Once the project is complete, the Part 3 application is submitted with "After Rehabilitation" photos, taken from the same vantage point as the "Before" photos previously submitted. Part 3 Review fees must accompany an application in order for it to be considered a complete submittal. Projects shall not be processed, assigned, or reviewed (and as such, shall not be awarded their Tax Credits​) until payment is received.  

Awards

• Approved Part 3 applications are awarded tax credits to the tax year the project was completed in, which is not necessarily the same year the Part 3 application is submitted and/or approved. 
• For State Tax Credits, you'll include your approved Part 3 Application and the awarded tax credit amount when you file your KY tax return, using Schedule ITC or ITS. 
  

For questions regarding the tax-filing process, you should refer to the Department of Revenue's Tax Credit website and/or contact​ the Department of Revenue: D​ORTaxCredits@ky.gov.