Irs Section 42 Lihtc Program

The tax credit encourages developers to build affordable housing to meet the needs of the community.

Irs section 42 lihtc program.

The program is administered by the internal revenue service irs. The program regulations are under section 42 of the internal revenue code. As part of the tax reform act of 1986 the united states congress created the low income housing tax credit lihtc irc section 42 program to promote the development of affordable rental housing for low income individuals and families. Federal rental assistance programs help about 5 million households with low comes to affordably rent modest housing.

The purpose of the program is to provide a tax credit to property owners developers to create affordable rental housing. The term federally assisted building means any building which is substantially assisted financed or operated under section 8 of the united states housing act of 1937 section 221 d 3 221 d 4 or 236 of the national housing act section 515 of the housing act of 1949 or any other housing program administered by the department of. The section 42 housing program refers to that section of the internal revenue tax code which provides tax credits to investors who build affordable housing. Law and questions and answers a.

The low income housing tax credit lihtc program was created in 1986 and is the largest source of new affordable housing in the united states. There are about 2 000 000 tax credit units today and this number continues to grow by an estimated 100 000 annually. Eligible basis and qualified basis issues law. Section 42 falls under subsidized apartments which simply means decent housing can be made affordable to those who fall in a certain income range.

As a condition for receiving housing tax credits owners must keep the units. Tenant qualifications for section 42 tax credit programs. Section 42 is also known as a housing tax credit program or low income housing. 2004 82 purpose this revenue ruling answers certain questions about the low income housing credit under 42 of the internal revenue code.

Investors receive a reduction in their tax liability in return for providing affordable housing to people with fixed or lower income. The tax credit reform act of 1986 created the low income housing tax credit program lihtc. In exchange for the tax credit the property owner. Section 42 of the internal revenue service s tax code also known as the low income housing tax credit exists to serve high need.