Kentucky historic tax credit: the 2026 rules for 20% and 30% rehabilitation credits
By the Tax Field Guide editorial team. Published 2026-11-05. Facts checked 2026-11-05. Related strategies: Purchased Energy Credits.
Education only; not tax, legal or investment advice. Tax rules change, and how they apply depends on your facts. No outcome is guaranteed.
Kentucky's certified rehabilitation tax credit pays back part of the cost of rehabilitating a certified historic structure. A 2026 law rewrote the program for applications received on or after April 30, 2026: it added a higher rate for affordable housing, split the annual cap into two rounds and opened transfers to many more buyers. This guide summarizes the new statute (KRS 171.398) and the Kentucky Department of Revenue's guidance. For every Kentucky incentive we track, see the Kentucky state page.
How much is the credit?
For applications received on or after April 30, 2026, the credit equals:1
| Property type | Credit | Maximum per project |
|---|---|---|
| Owner-occupied residential property | 30% of qualified rehabilitation expenses | $120,000 |
| Commercial residential property affordable to households at 80% or less of median family income | 30% | $10 million |
| All other property | 20% | $10 million |
The credit is claimed for the taxable year in which the certified rehabilitation is completed.1 Exempt entities that incur qualified rehabilitation expenses can transfer or assign their credit.1
Annual cap and application rounds
The Department of Revenue says the overall cap rose to $100 million for applications received on or after April 30, 2026, with 15% allocated to owner-occupied residential property (it was 25% before that date).2 Under the statute, applications for a preliminary determination are due before April 15 or August 15 of the year the project begins, with $50 million allocated to each round. The Kentucky Heritage Council notifies applicants by June 30 or October 30. If a round is oversubscribed, the cap is shared pro rata among approved projects.1
Use it or transfer it
When applying for the final credit after the project is complete, the owner makes an irrevocable election:1
- Use the credit, in which case it is refundable; or
- Transfer the credit, in which case it is nonrefundable to the buyer.
Transfers can be for some or no consideration to anyone subject to Kentucky individual or corporate income tax and the limited liability entity tax, or to the bank franchise and insurance premium taxes listed in the statute. The seller must notify the Department of Revenue within 30 days, and the buyer can carry unused credit forward up to seven taxable years. Consideration received for the transfer is not subject to Kentucky income tax.1 For applications received before April 30, 2026, transfers were limited to financial institutions.2 See how state tax credit transfers work and buying Kentucky tax credits.
Penalty for disqualifying work
The Department of Revenue must assess a penalty equal to 100% of the credit on an owner that performs disqualifying work on the certified structure, or, for credits based on affordability, fails to keep the commercial residential property requirements. The penalty is assessed against the property owner, not a transferee.12
Finding help
Historic consultants prepare the Kentucky Heritage Council and National Park Service applications, and CPAs and tax lawyers handle the election, transfer and claim. The advisor directory lists Kentucky firms whose own sites describe this work, including a Louisville historic consulting firm, a Lexington preservation nonprofit that offers fee-based application help, and a Kentucky law firm whose tax group covers historic credits, New Markets Tax Credits and opportunity zones. Check credentials yourself, and see how to find a tax mitigation advisor.
Common questions
What is the Kentucky historic tax credit rate?
30% of qualified rehabilitation expenses for owner-occupied homes and affordable commercial residential property, and 20% for other property, for applications received on or after April 30, 2026.
Is the Kentucky historic tax credit refundable?
Yes, if the owner elects to use it. If the owner elects to transfer it, the credit becomes nonrefundable for the buyer.
When are Kentucky historic tax credit applications due?
Before April 15 or August 15 of the year the project begins. The Kentucky Heritage Council's site should be checked for the current round before relying on any date.
Education only; not tax, legal or investment advice. Talk to a qualified professional before acting.
Sources
- KRS 171.398, https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=56938
- Kentucky Department of Revenue, Certified Rehabilitation Tax Credit, https://revenue.ky.gov/Business/Pages/Certified-Rehab-Tax-Credit.aspx