2.3.5.2. Low-Income Housing Tax Credit
The low-income housing tax credit (LIHTC) has also been in play since 1986. Its purpose is to encourage private investment in low-income housing. Two types of tax credit are available. A 9% tax credit is allotted by the federal government to the states, which the states distribute to qualifying developers through a competitive bidding process. Investments must be in new buildings that are not federally subsidized. A 4% tax credit is available for projects that receive at least 50% of their funding through tax-exempt bond financings. Qualified projects may claim the 4% tax credit without needing an allocation from the state. The LIHTC is discussed in greater detail in Chapter 3.
IRC Section 42
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Tax Credits |
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Type of Tax Credit |
Characteristics of Credit |
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20% Rehabilitation Tax Credit |
• Applies only to certified historic commercial structures • Must use straight-line depreciation • Cost must exceed pre-rehabilitation tax basis of the building • Must be claimed at 4% per year over a five-year period once placed in service • Owner must hold building fo |