In an effort to help landlords build cheaper or more affordable dwellings, the government initiated the low income housing tax credit (LIHTC) program. This program offers tax credits to landlords who rent out their apartments to people from low income groups. However, there are certain eligibility criteria that have to be met. These criteria may differ in every state so it’s important that you visit the U.S. Department of Housing and Urban Development website.
Understanding the LIHTC Program
The LIHTC program encourages developers to build low income housing projects by funding a large percentage of the money that’s spent to build these projects. These funds are allocated in terms of tax credits. In order to avail of these tax credits, landlords or developers will have to send in an application to the state authority.
Calculating Low Income Housing Tax Credit
To determine your low income housing tax credit you will have to first find out how much of your development cost is eligible for tax credits. You will also have to find out what is the current tax credit rate. Once you get these two figures, multiply them to get the annual housing tax credit amount. Depending on the type of housing project you’re building, the current tax credit rate could either be 4 percent or 9 percent.
To get an estimate of your low income housing tax credit you must visit the HUD.gov website or contact a counselor who will guide you through the process.