The Low-Income Housing Tax Credit Program

The Low Income Housing Tax Credit Program is a program that is utilized by the Department of Housing and Urban Development or HUD. This program is designed to provide tax credits to developers who are willing to build low income housing in specific areas. These tax credits are meant to provide incentives for the developers so that more low income housing will be available to the masses. Here are the basics of the Low Income Housing Tax Credit Program and how it works.

Tax Credits

The most important part of this program is the tax credits that are issued to developers. Working in conjunction with HUD, these developers can contract to build low income housing. If they agree to build the housing to certain specifications, HUD will provide them with a certain amount of tax credits. These tax credits can then be used to the advantage of the developer. The developer can take the tax credits and turn around and sell them to private investors. Private investors will then be able to use the tax credits when they file their taxes. This provides them with a dollar for dollar decrease in their personal income taxes. These tax credits are used on a federal level which lowers the amount of federal income taxes that you would have to pay in this case.

Incentives

Typically, many developers do not want to get involved in building low income housing. Building homes for low income individuals is generally not as profitable as building nicer properties. The developers can only charge so much for each unit and it can be difficult to manage the properties as well. If the developer is going to rent out the properties, it can be challenging to manage a low income property. Because of these unique challenges, HUD developed this program so that more investors would be interested in building low income housing. The purpose of the HUD is to make low income housing available to more people across the country. Unless there are enough units built to accommodate the demand for low income housing, people will still be suffering from not having a place to live. By increasing the number of properties that are available through a tax credit program, more people will be able to find a home.

Length of Credit

One of the best things about this program is that it is not a one-time deal. Investors that put money into this type of project will receive a tax credit on their taxes every year for the next 10 years. The amount of the tax credit will be based solely on the amount of money that was put into the project by the investor. This means that your tax credit can increase if you are willing to put more money into the development of low income properties. By getting a 10 year tax credit, many investors are willing to part with their money to get involved with this program.

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