The Low Income Housing Tax Credit program, Controlled by the U.S. Department of Housing and Urban Development, began in 1986. Throughout this program, owners of multi-family houses designate income-based apartments, also referred to as tax credit properties, to low income residents for a reduced rent. Owners get a financial benefit from the authorities for their participation in this program.
Landlord Gains
The Internal Revenue Service summarizes the LIHTC application under section 42 of the Internal Revenue Code. Landlords receive a substantial monetary incentive, which subsidizes the expense of developing the low income units, in the shape of a dollar-for-dollar tax charge for the first 10 decades of the participation in the program. Developers who engage may syndicate the credit–transferring it to an investor or a group of investors to gather up to 55 percent of their growth costs up front in funds to employ toward the purchase or building job.
Landlord Eligibility
Landlords must devote to designate at least 20 percent of their property’s units to tenants who earn 50 percent or less compared to the area’s median gross income; or 40 percent of units to tenants who earn 60 percent or less compared to the median gross income. These tenants might well not pay rent in excess of the sum indicated by HUD for the region and unit dimensions, or 30 percent of the adjusted gross income, which can be calculated by HUD. Eligible projects include single-family houses, duplexes, townhouses and apartments, excluding buildings with four units or less when owner-occupied or occupied by an owner’s relative. To qualify for the program having an current building instead of new structure, the owner must complete a rehab of their property.
How to Apply: Investors
HUD releases federal funds for the program in the state level, with quantities allocated according to population. Owners or investors that want to participate should submit an official program record called a Qualified Allocation Plan to their state housing service for consideration. State housing organizations award funds on an annual basis, and may roll over funds to another year to be utilized within a two-year interval before being allocated to another state undertaking.
Tenant Eligibility
Households earning 60 percent or less of the area median income may apply for housing in the LIHTC program. Households in which companions attend college full-time are ineligible for the LIHTC program, with the exception of families populated by 2 married adults filing a joint tax return, or single parents with dependent children who might attend college full-time without impacting eligibility.
How to Apply: Renters
Look for apartments that indicate their”tax credit” or”LIHTC” real estate standing in their print and internet advertisements. Telephone the home owner or manager, and inquire if they have any tax credit apartments available. Collect proof of income, birth certificates and social security cards for all family members to supply to the property owner or manager through the application process. Application and annual re-qualification happen directly with the landlord or management company which operates the apartment.