Series 22: 2.3.5.2. Low-Income Housing Tax Credit

Taken from our Series 22 Top-off Online Guide

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

Tax Credits
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

Type of Tax Credit

Characteristics of Credit

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

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