What is a Tax Credit and why should you care?

What is a Tax Credit and why should you care?

A tax credit is an amount of money that taxpayers can subtract from taxes owed to their government. Unlike deductions and exemptions, which reduce the amount of taxable income, tax credits reduce the actual amount of tax owed. Tax credits reduce tax liability dollar for dollar.

What is Place-Based Impact Investing?

Place-based impact investing is an investment strategy that centers on local companies and projects that aims to bring location based social benefits still with personal financial returns. Examples of investments include local affordable housing, community solar power, and municipal bonds.

Nothing can be said to be certain except death and taxes!  Benjamin Franklin 1789

What better way to minimize investment risk by combining the certainty of paying taxes and the investment in your local community? This can be done with an historic preservation tax incentive. Montana is one of thirty five states in the nation that has created an additional state incentive that can be matched with the federal Historic Preservation Tax Incentive also known as the Historic Tax Credit (HTC).  

As a local impact investor, you can provide up to 25% of the capital investment needed to update, repurpose, and create benefit for your local community with an HTC investment. Over 5 years, you take a dollar for dollar tax credit off of your state and federal taxes by investing in a rehabbed property in your community.

In the past 10 years, Montana locals have invested over $5.8 million dollars in Masonic Lodges alone. Think of it this way, every community at one time likely had a Fraternal Order in their community – the Mason’s, Odd Fellows, Eagles Club or Hibernian Order. Many of these buildings are no longer utilized to their full potential. This creates opportunity for repurposing, but the buildings are usually aged and require renovation. 

This is the point that someone with vision can be matched with an impact investor. It sounds complicated, but it does not have to be. Ask your tax accountant about Schedule K-1 tax credit investments. Then look around your community at those old buildings and properties that have been taken for granted for many years.  

Think of it as Don Quixote of La Mancha did, “They might be Giants”. Instead of passing judgement on underutilized old spaces, why not consider utilizing an impact investment with a K-1 tax investment? Your investment can impact the economic footprint of your community and help turn that old space into a diamond in the rough.