Low Income Housing Credit

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Low Income Housing Credit

• Incentive for Owners of Newly Constructed or
  Newly Renovated Rental Housing for Low Income
  Persons

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What Is the Low-income Housing Credit?

• 70 of the qualified basis of each new low-income
  building placed in service after 1986
• 30 of the qualified basis for each new or
  existing low-income building that was federally
  subsidized
• The credit is taken over a 10-year credit period
  starting at the beginning of the tax year the
  building is placed in service or the following
  year if elected
• There is a 15-year compliance period during which
  the residential building must continue to meet
  certain requirements

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What Is a low-Income Housing Project?

• Residential rental building in low-income housing
  projects that meet one of the minimum set-aside
  tests (20-50 or 40-60)
• 20-50 test 20 or more of the residential units
  in the project must be both rent restricted and
  occupied by individuals whose income is 50 or
  less of the area median gross income
• 40-60 test 40 or more of the residential units
  in the project must be both rent restricted and
  occupied by individuals whose income is 60 or
  less of the area median gross income

Once made, the election is irrevocable
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What Are the Requirements for the Credit?

• Except for the buildings financed with certain
  tax-exempt bonds, you may not take the credit on
  a building if it has not received an allocation
• No allocation necessary if 50 or more of
  aggregate basis of building and land it is on is
  financed with certain tax-exempt bonds issued
  after 1989 or 70 of the basis financed with
  certain tax-exempt bonds issued before 1990
• The credit cannot exceed the amount allocated by
  the housing credit agency

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Low-income Housing Credit Allocation
Certification Form 8609

• Used to obtain a housing credit allocation from
  the housing credit agency.
• Separate Form 8609 must be issued for each
  building in a multiple building project
• Allocations of credit in separate calendar years
  require separate Forms 8609
• If a building receives separate allocations for
  acquisition of an existing building and for
  rehabilitation expenditures, a separate form 8609
  must be completed for each credit allocation

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Form 8609 Part I
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Form 8609 Part II
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Schedule A Form 8609 Annual Statement

• Must be completed by the building owner each year
  of the 15 year compliance period, whether or not
  a credit is claimed for the tax year
• A separate form must be used for a building
  receiving separate allocations for the building
  and the rehabilitation expenditures
• Owner must attach Schedule A, the Form 8609 and
  Form 8586 to his tax return

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Schedule A Form 8609
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How Do I Claim the Credit?

• Claim the credit using Form 8586

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Recapture of the Credit

• If, as of the close of any tax year within the 15
  year compliance period, there is a reduction in
  the qualified basis of the building from the
  previous year, you may have to recapture a part
  of the credit you have taken
• You may also have to recapture part of the
  credits taken in previous years upon certain
  dispositions of the buildings or interests therein

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Need More Information?

• IRS Publication 334
• Form 8609
• Form 8586
• IRC 42
• 1-800-829-1040
• www.irs.gov