Section 42 Tax Credit Lihtc Housing Program

Projects serving low income.

Section 42 tax credit lihtc housing program.

The passive loss rules and similar tax changes made by tra86 greatly reduced the value of tax credits and deductions to individual taxpayers. The program regulations are under section 42 of the internal revenue code. It particularly benefits low income residents of high rent high income locales like. The tax credit reform act of 1986 created the low income housing tax credit program lihtc.

The tax credit encourages developers to build affordable housing to meet the needs of the community. Overview of the irc 42 program. The taxpayer agrees to provide low income housing for at least thirty years. The tax credits are more attractive than tax deductions as the credits provide a dollar for dollar reduction in a taxpayer s federal income tax whereas a tax deduction only provides a reduction in taxable income.

Gives preference among selected projects to. The credits are also commonly called section 42 credits in reference to the applicable section of the internal revenue code. What is section 42. In exchange for the investment in low income housing the taxpayer will receive tax credits for each of ten years which is known as the credit period to keep the credit the taxpayer must provide low income housing for fifteen years.

Section 42 of the internal revenue code irc or the code is the federal statute establishing the tax credit program. Projects obligated to serve qualified tenants for the longest periods. Sets forth selection criteria to be used to determine housing priorities.