Rural Historic Tax Credit Improvement Act

This bill boosts the federal tax credit for fixing up buildings in rural areas. Projects that add or keep affordable homes can get a 40% credit on qualified rehab costs; other rural projects can get 30%, with up to $5 million in costs per project counting toward the credit. “Rural” means places outside cities of more than 50,000 people and their nearby urbanized areas. “Affordable housing” serves households at or below 80% of the area’s median income. A project counts as “affordable housing” if at least half of the finished project is housing and at least half of that housing is affordable, or if at least one-third of the whole project is affordable housing .

The credit can be transferred (sold) to someone else to help raise money for the project. Money you receive for the transfer isn’t taxed as income, and the buyer can’t deduct what they paid for it. If a project takes the higher credit as affordable housing but then breaks the affordability rules before the end of the required period, the government takes back the credit unless it’s fixed within 45 days. The bill also removes a rule that would have lowered the project’s tax value when you use this credit, making the credit more valuable overall. These changes apply to property placed in service after December 31, 2025 .

Key points:

• Who is affected: People and developers fixing up buildings in rural areas; communities adding or preserving affordable housing.
• What changes: 40% credit for affordable housing projects; 30% for other rural projects; up to $5 million in eligible costs per project; credit can be sold; stronger rules to keep housing affordable; no reduction to the project’s tax value because of this credit .
• When: Applies to buildings placed in service after December 31, 2025 .