State Income Tax Credit Program
The State Income Tax Credit for Registered Cultural Properties program was established in 1984 to encourage the restoration, rehabilitation and preservation of cultural properties.
Since then, more than 800 projects have been approved for New Mexico homes, hotels, resturants, businesses and theaters that benefited from one of the few financial incentives available to owners of historic properties. The program has nearly a 7:1 community investment ratio for every dollar provided through a credit. In a recent five-year period, the statewide program saw approved rehabilitation construction projects totaling $7.4 million, spurred by the catalyst 0f $1.4 million in taxpaer-eligiblecredits.
More than 800 homes and businesses in New Mexico have been restored or rehabilitated using state and federal preservation tax credits.
The state income tax credit is available to owners or long-term lessees of historic structures who complete qualified, pre-approved rehabilitations of historic structures or stabilization or protection of archaeological sites. Download an application here.
- The property must be individually listed in, or be listed as contributing to a State Register of Cultural Properties historic district. It may be a residence, an income-producing property (such as an apartment building, office or store), or an archaeological site.
- The State Cultural Properties Review Committee must approve the proposed rehabilitation prior to the beginning of the project. All work must conform to the guidelines in the regulation NMAC 4.10.9 (PDF format) as interpreted by the CPRC. All parts of the project must be described in Part 1 of the application, including those parts not eligible for credit, e.g. a new addition to the structure.
- The project term expires 24 months from the date of the Part 1 approval.
- The completed project must be documented in Part 2 of the application and be approved by the CPRC for the tax credit. Completed conditions and project expenses must be fully documented and submitted with the application.
- The maximum amount of project expenses eligible for the tax credit is $50,000 although the total project cost may exceed this amount.
- Maximum credit is 50% of eligible costs of the approved rehabilitation or $25,000 (50% of project maximum) or 5 years of tax liability, whichever is least. The credit is applied against New Mexico income taxes owed in the year the project is completed and the balance may be carried forward for up to four additional years unless used up sooner.
- When a listed property is located with the boundaries of an Arts & Cultural District that has been specifically certified for this purpose by the state Arts & Cultural District Coordinator, the maximum amount of eligible expenses is increased to $100,000 for an increased maximum tax credit of $50,000.
Frequently Asked Questions
Who is eligible for the program?
Any individual, partnership or corporation who:
- Owns or leases a property that is listed in the State Register of Cultural Properties or is a contributing property to a historic district listed in the Register. (Contact the Historic Preservation Division in Santa Fe, 505-827-6320, to find out if your property meets this requirement.)
- Applies to the program and performs a rehabilitation project that was approved by the Cultural Properties Review Committee prior to the beginning of construction.
How much money can I actually save?
This depends on your annual state income tax liability and the amount of money that you spend on the restoration, rehabilitation or preservation of your property.
- In general, the program grants an amount equal to 50% of approved expenses toward income tax credit.
- The credit may be used for a total of five years. The CPRC must certify the completed project as a qualified rehabilitation and establish the expense/credit amount. The applicant may use the tax credit for the tax year in which funds were expended. Any remaining credit amount may be carried forward for four more years. If the total amount of credit cannot be utilized within five consecutive tax years, the surplus is forfeited.
- However, the program limits allowable expenses to $50,000 for any single project, limiting the credit to $25,000, even though costs to rehabilitate may exceed this figure. When a listed property is located within the boundaries of an Arts & Cultural District that has been specifically certified for this purpose by the state Arts & Cultural District Coordinator, the maximum amount of eligible expenses is increased to $100,000 for an increased maximum tax credit of $50,000.
What kind of work qualifies for the credit?
All work must conform to the standards in program regulation NMAC 4.10.9. The CPRC must approve the work plan before any construction begins. Typical work that may be eligible for credit are:
- New roofing or repairing roofing, eaves and fascia
- Repairing deteriorated woodwork
- Stabilizing foundation and structural elements
- Repairing windows
- Restoring interior and exterior finishes
- Repairing or replacing utility services to conform to applicable code requirements
Costs for items such as interior furnishings, new construction, minor repairs and demolition are not generally eligible toward tax credit.
What if I construct an addition to my house—can I still get receive tax credits?
Possibly, if the addition is part of a larger rehabilitation project. The CPRC reviews all the work in a 24-month period for its effect on the historic characteristics of the building and determines which costs would be eligible for credit.
For instance, a project that includes a new addition at the rear of a house and repair of exterior woodwork on the original historic house could be approved by the CPRC. Costs of the woodwork repair could be eligible toward credit, but the costs of the new addition would not be eligible.
Are archaeological sites eligible for the tax credit?
Yes, if the site is listed in the State Register of Cultural Properties. The owner or lessee may claim the credit for pre-approved stabilization, protective maintenance or fencing. The project must comply with all requirements of the program, including the completion and approvals of applications. The cost of excavating an archaeological site is not eligible for the credit program, since this is not considered restoration, preservation or rehabilitation. While the CPRC does not discourage excavation by qualified individuals, it strongly recommends that the owner/lessee of an archaeological site contact the Committee prior to any excavation. Improper excavation may be cause for removing a site from the State Register.
How do I apply for the State Income Tax Credit?
An application can be dowloaded from this page or obtain one from the Historic Preservation Division (HPD) office. Complete the form according to the instructions. Send the application so that it arrives at HPD before the deadline of 14 days prior to a meeting of the Cultural Properties Review Committee (CPRC) for action at that meeting.
Federal Tax Credit Program
The National Park Service administers the Historic Preservation Tax Incentives Program in cooperation with the State Historic Preservation Office. It is a three-part application process. Participation in the program is initiated with the State Historic Preservation Office in Santa Fe.
- The building must be individually listed in, or contribute to a historic district listed in the National Register of Historic Places. In some cases the property may be determined eligible for listing, but has not yet been listed at the beginning of the rehabilitation project. The significance of the property is described in Part 1 of the application.
- The eligible expenses of a rehabilitation project must be at least equal to the adjusted basis of the building (value of building minus value of land. See IRS Code).
- The project must be an income producing property and expenses for any portion used for personal residence do not qualify.
- Rehabilitation work must be fully described in the Part 2 application. The work must conform to the Secretary of the Interior's Standards for Rehabilitation as interpreted by the National Park Service.
- The program generally allows up to 20% of the eligible costs of rehabilitation work to be credited against Federal income taxes. The credit is applied against federal income taxes owed in the year the project is completed, and can be carried backward 1 year and forward 19 years. Some provisions of the Internal Revenue Service Code may affect a taxpayer's ability to utilize the full credit. Taxpayers should seek professional tax advice concerning their specific circumstances.
- Comprehensive information about the program, including application forms and instructions, guidance, on-line tutorials, and an IRS link are available at the National Park Service’s tax credit program website.