Q&A of the Week January 17, 2024

Question

What is the Low-Income Housing Tax Credit (LIHTC)?

Answer

The Low-Income Housing Tax Credit is a business credit for taxpayers who invest in the development and rehabilitation of affordable housing. 

Qualifications for the tax credit include:

• Must be for a residential rental building in a low-income housing project

• Must meet the Income Test for tenants for at least 15 years

• Must meet the Gross Rent Test for at least 15 years

Here are some benefits of the LIHTC:

• Provides low-income families with a safer place to live

• Lower cost for rent frees up income for other necessities or savings

• Creates jobs for economic development

• Aids struggling communities

States allocate the LIHTC through qualified allocation plans, which means that rental properties that house very low-income families for longer periods get priority for receiving the tax credit.

Qualified businesses can claim the LIHTC with IRS Form 8586.

You can find out more in this article from Rocket Mortgage: https://www.rocketmortgage.com/learn/low-income-housing-tax-credit.

As always, we suggest you speak with a tax professional.