Low Income Housing Tax Credit? - Posted by NicoleJ

Posted by Nate(DC) on October 23, 2003 at 04:15:01:


My experience has been that in most cases, it is not worth the hassle and paperwork to go through just for one unit.

You only get a credit of about 8% of your eligible basis, annually for 10 years. So if you built a home that cost $100,000 then you could get a credit of $8,000 for 10 years. That sounds good, except that

-not all of your $100,000 will be eligible basis (land and some permanent financing costs aren’t included) so you’ll actually end up with less than $8,000 credit
-Additionally, some states limit the amount of credit you can be awarded per unit, so you might get even less than you think
-You’ll have to pay an up-front application fee of $500-$1000 to even apply
-As I said, it is a competitive process. There are more applicants than there are credits. There is NO guarantee that you will be awarded credits, in which case your $500-$1000 is down the tubes.
-If you go through all that, you might get hit with the AMT and get little to no net benefit from the credit. You need to have your accountant check to see if having the credit would trigger anything.

If you still are interested, contact your state housing agency and find out when the next application round is. Ask for the application materials and read them carefully. That will provide further guidance.


Low Income Housing Tax Credit? - Posted by NicoleJ

Posted by NicoleJ on October 22, 2003 at 22:26:29:

I rent houses solely to low income families via the Section 8 program. I had heard there’s a low income tax credit, form 8586 & form 8609 and am wondering what it takes to qualify for the credit. I even called the IRS help line, suprisingly they weren’t any help. I’ve read the forms on irs.gov but either the legalese was over my head or the forms don’t explain who qualifies and who doesn’t.

Is anyone familiar with the particulars of this tax credit?

Thanks in advance,

Re: Low Income Housing Tax Credit? - Posted by Nate(DC)

Posted by Nate(DC) on October 22, 2003 at 22:48:39:

Yes, I deal with this all the time. I will be very brief, because you don’t qualify for the credit. In order to take the credit, you have to apply, in advance, for the credit from your state housing agency. Additionally, you have to be approved by the agency for the specific unit(s) you are renting, and you also can only take the credit for the cost of building or rehabilitating housing. The allocation is a competitive process and there is no guarantee you will get the credits just because you apply.


Re: Low Income Housing Tax Credit? - Posted by Nicolej

Posted by Nicolej on October 22, 2003 at 23:04:36:

Thanks Nate. This might be a naive question but:

Would it be possible to apply for the credit prior to purchasing a new home - since essentially I’m paying for the cost of building a home I intend to rent to low income tenants?

Or is this credit really intended for the developer that is building an apartment building or rehabing a housing project like the recent rehab of the projects in Chicago?