Low-Income Housing Credit - Real Estate Tax Tips

The following information originates from the United State Internal Revenue Service's website, http://www.irs.ustreas.gov/.

The low-income housing credit can only be claimed for residential rental buildings in low-income housing projects that meet one of the minimum set-aside tests. How to Claim the Low-Income Housing Credit An owner of a residential rental building in a qualified low-income housing project uses Form 8586, Low-Income Housing Credit (PDF), to claim the low-income housing credit. Calculating the Credit The low-income housing credit determined is a credit of 70% of the qualified basis of each new low-income building placed in service after 1986 (30% for certain federally subsidized new buildings or existing buildings). This credit is taken over a 10-year period so that the present value of the 10 annual credit amounts determined as of the last day of the first year of the credit period equals 70% (or 30%) of the building's qualified basis. In general, the 10-year credit period starts at the beginning of the tax year in which the building is placed in service. Electing to Begin the Credit in the Second Year of Service You may elect to begin the 10-year credit period in the tax year after the year the building was placed in Service by checking the "Yes" box in Part II, line 10a, of Form 8609, Low-Income Housing Credit Allocation Certification (PDF). Once made, the election is irrevocable. Passive Activity Losses Passive activity rules may apply and may prevent you from taking the credit. See the Passive Activity Losses Tax Tip for more information. Additional Resources Affordable Housing Resource Center Form 8586, Low-Income Housing Credit (PDF) Form 8609, Low-Income Housing Credit Allocation Certification (PDF) Publication 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) Low-Income Housing Credit Audit Technique Guide (PDF) National Housing & Rehabilitation Association

This information originates from the United State Internal Revenue Service's website, http://www.irs.ustreas.gov/.