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

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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