South Carolina’s 25% Historic Tax Credit for Homeowners

If you own and live in a historic house in South Carolina, part of what you spend rehabilitating it may come back to you as a state income tax credit. The program is run through the State Historic Preservation Office (SHPO), and its single most important rule is the one people miss: the work has to be approved before it starts.

This guide explains the program as the SHPO describes it. It is not tax advice; the SHPO itself recommends talking to an attorney or tax specialist about how the credit affects your own taxes.

What the credit is

Under the South Carolina Historic Rehabilitation Incentives Act (Section 12-6-3535), homeowners who rehabilitate their owner-occupied historic residence may be eligible to take 25% of qualifying rehabilitation costs as a credit against their state income taxes.

Does your house qualify?

According to the SHPO, the building has to meet both of these:

• You own it and live in it, or in the part being rehabilitated. A historic outbuilding tied to your residence, such as a garage, can qualify too. Parts used for a business or to produce income do not.
• It is historic, meaning one of: individually listed in the National Register of Historic Places; contributing to a listed National Register historic district; determined eligible for individual listing by the SHPO; or an outbuilding that contributes to a listed property.

Many houses on the Charleston peninsula sit in National Register districts, but whether a particular house is “contributing” is something the SHPO confirms.

Approval comes first

The SHPO must review and approve the plans before work begins. It certifies that all of the project work, including work that doesn’t earn the credit, meets the Secretary of the Interior’s Standards for Rehabilitation, and when the work is done it checks that the result matches what was approved. In practice that means completing the S1 and S2 parts of the application and getting approval before anyone starts work; the S3 follows at completion.

This is where a renovation can lose the credit without meaning to: if demolition or work starts before approval, the SHPO hasn’t approved it. For the other things to settle before work starts on an older house, from BAR review to what is behind the walls, see what to know before you renovate a historic Charleston home.

What counts toward the credit

The SHPO lists these as qualifying rehabilitation expenses:

• Preservation and rehabilitation work on the exterior of the historic building
• Repair and rehabilitation of historic structural systems
• Restoration of historic plaster
• Energy-efficiency measures, except insulation in frame walls
• Repair or installation of heating, air conditioning and ventilation
• Repair or installation of electrical and plumbing systems, not counting new appliances and fixtures
• Architectural and engineering fees

Not counted: new construction beyond the volume of the existing building, buying or marketing the property, the value of your own labor, and personal property.

There is a minimum: the SHPO says you must spend more than $15,000 on qualifying expenses within 36 months, though the whole project doesn’t have to be finished in that window.

How the credit is claimed

The credit is taken in installments starting the year the property is “placed in service”, meaning the rehabilitation is complete and you are living in it. For property placed in service after June 9, 2015, each installment is a third of the credit. Unused installments can be carried forward up to five years, and the credit is claimed with South Carolina Department of Revenue form SC SCH. TC-22. The SHPO notes a taxpayer can claim only one such credit on the same building within ten years.

How we work on a historic renovation

On a historic job, we work with an architect on the drawings, plan the work to the Secretary of the Interior’s Standards from the start, and keep the application and the approved plan in step with what is built. Lime plaster, solid wood trim and original windows are the kind of materials the Standards favor repairing rather than replacing, and repairing them is how we prefer to work anyway. See historic home renovation and lime plaster and limewash.

If you are thinking about a historic renovation and want to know whether the credit could apply, request a consultation. We’ll talk it through at the first visit and point you to the SHPO and your tax adviser for the parts that are theirs to confirm.

Sources: SC Department of Archives and History / SHPO, Homeowner tax incentives (“Applications must be submitted to the SHPO for review and approval BEFORE WORK BEGINS”) and Frequently Asked Questions – Homeowner Tax Credits (updated March 2021); SC Code Section 12-6-3535; SC Department of Revenue form SC SCH. TC-22; National Park Service, Secretary of the Interior’s Standards for Rehabilitation.