Historic Tax Credit Bill Offers 30% Break, Lets Investors Keep Full Depreciation, and Opens the Door to Selling Credits

This bill, the Historic Tax Credit Growth and Opportunity Act of 2025, is a major overhaul of the federal tax break for rehabilitating historic buildings. It essentially throws a party for real estate investors and developers focused on preservation. The core change is a permanent 20% tax credit for qualified expenses on projects placed into service after December 31, 2023. This locks in a favorable rate and provides certainty for future projects.

The Double Dip: Credit Plus Full Depreciation

The biggest win for investors comes in Section 5, which eliminates the “basis adjustment” rule. Think of it this way: under the old rules, if you claimed a tax credit, you had to reduce the cost basis of your building by the amount of the credit. This reduced how much you could deduct later through depreciation. It was a trade-off. This bill removes that trade-off entirely. Now, you get the tax credit and you get to calculate your future depreciation from the full cost of the building, not a reduced amount. For developers, this is huge—it significantly increases the after-tax return on investment, making historic preservation projects much more financially attractive.

Small Projects Get a Big Boost (and a Transferable Credit)

Section 3 introduces a special, higher incentive for "qualifying small projects." If your project meets the criteria (essentially, it hasn't claimed a tax credit in the two years prior to this law), you can elect to receive a 30% credit rate instead of the standard 20%. This higher rate comes with a spending cap of $3.75 million. But here’s the interesting part: if that small project is in a rural area (defined as outside of cities over 50,000 people), the cap jumps to $5 million. This is a clear effort to spur investment in smaller towns and main streets where a $5 million project can be transformative.

Crucially, this 30% credit for small projects is transferable. This means the developer who earned the credit can sell it to another taxpayer who needs to reduce their tax bill. This creates a new revenue stream for the developer and makes it easier to finance the project upfront, especially for non-profits or smaller entities that might not have a large tax appetite themselves. For a busy professional looking for a tax shelter, this opens a new market for purchasing credits.

What It Means for the Rest of Us

While this bill is focused on developers and investors, the real-world impact is visible in the places we live and work. By making historic rehabilitation more profitable, we should see more historic warehouses turned into offices or apartments, and more old theaters and town halls restored. The higher cap for rural projects could mean revitalization for small-town main streets that have struggled to attract capital.

However, it’s important to note the financial mechanics. Giving investors a credit and full depreciation (Sec. 5) is a significant cost to the federal budget—meaning a reduction in tax revenue. While the goal is to encourage preservation, the cost of that encouragement is ultimately borne by the general taxpayer. The bill also makes technical tweaks (Sec. 6) to how investment credits interact with property leased to government entities, simplifying the rules for developers working with public partners like local municipalities or state agencies.