What Investors Should Know About the Housing Credit Program

Abstract Created in 1986, the Low-Income Housing Tax Credit (LIHTC) program was structured for people on fixed or lower incomes, the opportunity for quality housing at an affordable price. The program encouraged new construction, rehabilitation of already owned buildings or purchasing of an existing building that could be converted into affordable rental housing for individuals or families in need. In exchange for providing affordable housing, property owners and investors were eligible to receive certain tax credits. For the owners and investors to get the tax credit, there are a number of requirements that must be met in order to stay in compliance. This paper will discuss in detail the requirements to stay compliant in the IRS Low-Income Housing Tax Credit (LIHTC) program. Some of the leading requirements include income limit standards, rent limits according to the average median income, and full-time student status guidelines. Beyond the initial eligibility requirements, would be annual requirements for the following 15 years to make sure all the policies are being executed. In order to stay compliant within the program, rules and regulations must be followed according to a number of documents enclosed in the Internal Revenue Service and the U.S. Department of Housing and Urban Development. By the end of this paper, you should have an understanding of how the Low-Income Housing Tax Credit program works, what the compliance requirements consist of and the tax benefits an investor receives when investing in affordable housing