Have you ever walked past a cool old building and thought, “That would make an amazing office”? Probably not—because most of us assume historic buildings are expensive, complicated, and just not worth the hassle.
But here’s something most people don’t realize: there are tax credits designed specifically to make restoring historic buildings more affordable. And if you’re a dentist looking for a unique space for your practice, these credits may meaningfully offset your buildout cost.
That’s right—if you rehabilitate a qualifying historic building, a portion of what you spend on the rehabilitation may come back to you as a tax credit. There are real conditions attached, so let’s walk through them honestly.
Here’s how it works:
How These Tax Credits Work
The biggest tax break here is the federal Rehabilitation Credit under IRC §47. It’s a 20% credit on your qualified rehabilitation expenditures for a certified historic structure. Here’s the part most articles get wrong: since the 2017 tax law, you don’t take the credit all at once. You claim it ratably over five years, beginning in the year the building is placed in service. So on roughly $200,000 of qualifying rehabilitation work (an approximate illustration, 2026), the credit would be about $40,000 total—claimed as roughly $8,000 a year for five years, not $40,000 in year one. Unlike a deduction, which reduces taxable income, a credit reduces your tax bill dollar for dollar, which still makes it valuable—just on a slower timeline than you might expect.
Two more conditions worth knowing before you fall in love with a building. First, the property has to be income-producing and depreciable—so a building you own and operate your practice out of works, but a personal residence does not. Second, the project must pass the substantial rehabilitation test: within a 24-month period, your qualified rehabilitation spending has to exceed the greater of the building’s adjusted basis or $5,000. And not everything you spend counts—acquisition costs, enlarging the building’s footprint, and site work like sidewalks and parking lots are all excluded. The credit is claimed on Form 3468.
One more caution that matters for a lot of dentists: if you hold the building through an entity where your participation is passive, the passive activity rules can limit how much of the credit you can actually use in a given year. The IRS notes that an individual with adjusted gross income above $250,000 who invests passively in a rehabilitation project generally cannot use the credit against non-passive income. Whether that applies to you depends on how the real estate is owned relative to your practice, and it is worth modeling before you commit.
Many states offer their own historic rehabilitation credits on top of the federal one, and in some cases they can be combined for a materially larger benefit. State programs commonly fall in the 10–25% range, but the percentage, the annual caps, the carryforward period, and whether credits can be transferred or sold all vary by state and get amended often.
Closer to home, South Carolina offers its own credit for rehabilitating a certified historic structure under S.C. Code §12-6-3535. In broad terms, a taxpayer eligible for the federal credit may claim 10% of the same qualifying expenditures, or elect a 25% credit capped at $1 million per certified historic structure, claimed in equal installments over three years. Because the state and federal credits run on different schedules and different caps, the two need to be modeled together rather than assumed to simply stack.
What Counts as a “Historic” Building?
Not every old building qualifies. To get the credit, the property needs to be a certified historic structure—either individually listed on the National Register of Historic Places, or a contributing building in a registered historic district. The renovations also need to follow preservation guidelines, but that doesn’t mean you can’t modernize it for a dental office. You just have to be thoughtful about the updates.
Note: a building that isn’t individually listed can still qualify if it sits in a registered historic district and is certified by the National Park Service as contributing to that district’s character. That certification is a formal application, not an assumption—so confirm the building’s status in writing before you budget around the credit.
What Kinds of Renovations Qualify?
Here’s where it gets a little tricky. The goal of these credits is to preserve historic buildings, so your renovations need to follow certain guidelines. You can’t just gut the building and put up a brand-new modern office inside—you have to work with the existing structure while updating it for modern use.
That doesn’t mean you can’t make it functional for a dental practice. The National Park Service, which certifies rehabilitation work for the federal credit, generally allows:
- Updating plumbing, electrical, and HVAC systems to meet modern standards—which matters more for a dental buildout than most tenants, since operatories need water and suction lines, dedicated electrical for chairs and imaging, and a location for the compressor and vacuum pump.
- Restoring or replacing historic windows, doors, and woodwork to match the original style.
- Improving interior spaces as long as major historic features aren’t completely removed—worth pressure-testing early, since operatory layout, sightlines, and infection-control flow are harder to negotiate around load-bearing walls and protected millwork.
- Making ADA-compliant modifications, like adding ramps or accessible restrooms.
What they don’t want is someone buying a 100-year-old building, gutting it completely, and turning it into something unrecognizable. The best projects work with the original architecture rather than against it. One practical consequence: get your architect and the State Historic Preservation Office talking before you finalize an operatory layout, not after.
Why a Historic Office Might Be Worth It
Okay, so tax savings are great, but is this actually a good idea for a dental practice?
In the right situation, yes. A historic office can give your practice a look that helps you stand out in a market full of similar-looking suites.
Patients often appreciate a space that feels warm and inviting, rather than a cookie-cutter medical office. Plus, many historic properties sit in walkable, well-trafficked districts—good for visibility and new-patient flow, though worth checking against parking, which older downtown buildings frequently lack.
And let’s be honest, it just feels cool to own a piece of history.
A Few Things to Consider
This isn’t the fastest or easiest way to set up your practice, so there are some things to think about. The certification process runs through your State Historic Preservation Office and the National Park Service, and approvals take time—time during which you are carrying the building but not producing in it. Older buildings also come with quirks: unknown conditions behind the walls, higher ongoing maintenance, and change orders that arrive after demolition starts. Budget a contingency you would be comfortable spending.
That said, if you find the right building and the credit works in your situation, you could end up with a one-of-a-kind practice in a strong location—with a meaningful share of your rehabilitation cost coming back over those five years.
Want to See If This Makes Sense for You?
If this has you curious—even just a little—let’s talk. At Core Advisors, tax, accounting, and planning sit under one roof, which matters here more than usual: whether a historic building is a good move depends on how the credit interacts with your entity structure, how the real estate is owned relative to the practice, your passive activity position, your practice loan, and when you plan to exit. Those aren’t five separate conversations with five separate advisors. We can model the whole thing together and tell you honestly whether the credit is worth the complexity in your case.
To get in touch, head over to our Contact page to book an introductory call. Our team is always up for a chat.
Until next time!
This article is for educational purposes only and does not constitute tax, legal, or investment advice. Dollar examples are approximate illustrations for 2026 and are not projections of your result; eligibility for the federal rehabilitation credit and any state credit depends on your specific facts, including certification, ownership structure, and passive activity limitations. Rules are current as of August 2026 and may change. Please consult your own tax and financial advisors about your specific situation.
