The Low-Income Housing Tax Credits (LIHTC) can help reduce tax liability for property owners or investors that have agreed to provide low income housing in return for a tax credit. The tax credit can be quite a significant amount and can help reduce the cost for the development of low income property as long as it is operated as low income.
The LIHTC is a program that is monitored individually by state and must report any changes to the property to the IRS. The owner of the property must be able to ensure that the tenants meet certain requirements to be eligible to live in low income properties. If you are not able to prove that the tenant meets all requirements during their entire occupancy then you may lose the credit offered to you in this program. All property owners and investors must keep all requirement documentation on the tenants for 21 years from the first year a credit was claimed on their tax return.
Qualifications:
In order for your property to qualify as low income you must provide that at least 20% of the units have rent restrictions and tenants who live there must have income levels that are 50% or below the median gross income for that area. You may also opt for the 40% unit at 60% or less of the median gross income for that area. You must also provide the low income housing for a minimum of 30 years. This may vary from state to state. Some states may want you to provide 40 years of affordable housing to be eligible for this credit.
The affordable housing tax credit program can be very complicated and has many stipulations that must be met. We suggest using an online software service such as TurboTax online to make sure you meet all of the necessary requirements.
TurboTax online offers free tools and calculators to estimate the amount of tax credit you may receive as a low income property owner. Please visit TurboTax online to simplify the process of filing for the affordable housing tax credit.
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