Inside Information on Low-Income Housing Tax Credit
One of the fastest growing segments of the rental housing market is low-income, affordable housing. Since the Tax Reform Act of 1986 there have been government-sponsored tax incentives for the utilization of private equity in the development of low-income rental housing designed for Americans who qualify as “low-income”.
The Low Income Housing Tax Credit (LIHTC) is a dollar-for-dollar tax credit made available to all who qualify. As an indirect Federal subsidy program, the LIHTC seems complex, but is effect if implemented correctly. Here is a quick outline:
Housing Tax Credit-Federal Housing Credits are awarded to developers of qualified projects. Developers then sell credits to investors to raise equity for their projects. This reduces the debt the developer would otherwise have to borrow. Since the debt is lower, the property can be more affordable in the end. READ MORE
Allocation of Tax Credits-Montana is offering $2,525,000 for the 2012 year (deadline of Jan 20, 2012). This is state decided and highly variable. The applications prove to enter a competitive process with priority given to 1) serve lowest income families and 2) remain affordable for the longest period of time. READ MORE
Eligibility-A proposed project must be a residential rental property, committed to one of two low-income requirements, restrict the cost of rent, and be long term. READ MORE
What counts as low-income?
- One person =$10,890
- Three People=$18,530
- Six People=$29,990