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Are there any special tax
breaks for historic rehab?
ANSWER: Qualified rehabilitated buildings and
certified historic structures currently enjoy a 20
percent investment tax credit for qualified
rehabilitation expenses. A historic structure is one
listed in the National Register of Historic Places or so
designated by an appropriate state or local historic
district also certified by the government. The tax code
does not allow deductions for the demolition or
significant alternation of a historic structure.
Resources: * National Trust for Historic Preservation,
1785 Massachusetts Ave, NW, Washington, DC 20036-2117;
(202) 588-6000, nationaltrust.org.
Are there gov't programs for rehab?
ANSWER: The U.S. Department of Housing and
Urban Development's Section 203 (K) rehabilitation loan
program is designed to facilitate major structural
rehabilitation of houses with one to four units that are
more than one year old. Condominiums are not eligible.
The 203(K) loan is usually done as a combination loan to
purchase a fixer-upper property "as is" and rehabilitate
it, or to refinance a temporary loan to buy the property
and do the rehabilitation. It can also be done as a
rehabilitation-only loan. Plans and specifications for
the proposed work must be submitted for architectural
review and cost estimation. Mortgage proceeds are
advanced periodically during the rehabilitation period
to finance the construction costs.For a list of
participating lenders, call HUD at (202) 708-1112.
If you are a veteran, loans from the U.S. Department of
Veterans Affairs also can be used to buy a home, build a
home, improve a home or to refinance an existing loan.
VA loans frequently offer lower interest rates than
ordinarily available with other kinds of loans. To
qualify for a loan, the first step is to apply for a
Certificate of Eligibility. Another program is the
Fedeal Housing Administration's Title 1 FHA loan
program. Resources: * "Rehab a Home With HUD's 203(K)"
brochure, U.S. Department of Housing and Urban
Development, Washington, D.C.; brochure online.
Can you deduct the cost of home improvements?
ANSWER: What you spend on permanent home
improvements, such as new windows, can be added into
your home's cost basis, or amount of money invested in a
home, which reduces capital gains when it comes time to
sell. Capital gains are determined by the difference in
price from the time a home is purchased and the time it
is sold, minus the cost of any permanent improvements.
However, the 1997 tax changes virtually eliminates the
capital gains tax for most homeowners (the exemption is
$250,000 for single homeowners and $500,000 for married
homeowners.). Still, it is worthwhile to save all
receipts for permanent home improvements just in case.
They also can be useful documentation when it comes to
marketing your home when you sell.
How do building codes work?
ANSWER: Building codes are established by
local authorities to set out minimum public-safety
standards for building design, construction, quality,
use and occupancy, location and maintenance. There are
specialized codes for plumbing, electrical and fire,
which usually involve separate inspections and
inspectors. All buildings must be issued a building
permit and a certificate of occupancy before it can be
used. During construction, housing inspectors must make
checks at key points. Codes are usually enforced by
denying permits, occupancy certificates and by imposing
fines. Building codes also cover most remodeling
projects. If you are buying a house that has been
significantly remodeled, ask for proof of the permits
involved before you purchase to avoid future liability
for fines.
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