IRS issues final regulations for the rehabilitation credit


Notice: Historical Content

This is an archival or historical document and may not reflect current law, policies or procedures.

IR-2020-210, September 15, 2020

WASHINGTON — The Internal Revenue Service today issued final regulations for taxpayers who claim the rehabilitation credit.

The Tax Cuts and Jobs Act (TJCA) amended the rehabilitation credit so that taxpayers now claim the rehabilitation credit over a five-year period. The TCJA amendments generally apply to a taxpayer's qualified rehabilitation expenditures paid or incurred after December 31, 2017.

Taxpayers, however, may claim the credit all in one year under pre-TCJA rules for projects that qualify under a transition rule. The transition rule allows taxpayers to use the prior law if the project meets these conditions:

  • The taxpayer owns or leases the building on January 1, 2018 and the entire period thereafter
  • The 24- or 60-month period selected for the substantial rehabilitation test begins by June 20, 2018

The final regulations require taxpayers to determine the rehabilitation credit amount in the year they place the building into service and allocate that amount ratably over the five-year period.

The final regulations also include a rule to coordinate the TCJA amendments with the special rules for the investment credit, of which the rehabilitation credit is part. Finally, the final regulations include examples illustrating how to apply the rules.

Updates on the implementation of the TCJA can be found on the Tax Reform page of