Low-Income Housing Tax Credit (LIHTC): Who Qualifies and What You Get
Learn how developers can use tax credits to fund affordable rental housing projects and the long-term compliance rules you must follow.
The Low-Income Housing Tax Credit (LIHTC) is a federal program designed to encourage the development and upkeep of affordable rental housing.
Who it's for
This program is intended for developers and owners who are building new affordable rental housing projects or rehabilitating existing ones.
What you get
You receive tax credits that equal the cost of construction or rehabilitation. These credits are applied to your taxes on a dollar-for-dollar basis over a period of 10 years.
What it costs you
While the credits are a significant benefit, you must commit to strict rules for a long time. You are required to maintain specific rent restrictions and tenant income limits for at least 30 years to keep the benefit.
The catch to know
There is a risk of "recapture," which means you could lose the benefits if the property fails to follow the required income eligibility rules. Ensuring your tenants meet the specific income requirements is essential to avoid these penalties.
How to apply
- Determine if your housing project meets the necessary construction or rehabilitation criteria.
- Ensure your project can meet the long-term rent and income restrictions.
- Consult with tax professionals regarding the application of credits over the 10-year period.
- Access more information through the official portal: https://www.huduser.gov/portal/datasets/lihtc.html