Preview

Investing in Low Income Housing Tax Credits

Powerful Essays
Open Document
Open Document
3374 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
Investing in Low Income Housing Tax Credits
The Investment Appeal of Low Income Housing Tax Credits

Overview of the LIHTC
The Low Income Housing Tax Credit (LIHTC) provides incentives for corporations and individuals to invest in the acquisition, development and rehabilitation of affordable housing. The program offers federal tax credits to private equity investors that work with profit or non-profit developers in constructing or renovating rental properties for low-income tenants, those who earn 60 percent or less of the median family income for their county. As of 2010, the program has sparked the construction of over 1.7 million housing units throughout the country.
The IRS allocates federal tax credits to Housing Credit Agencies (HCAs) in each state based on its population. HCAs award credits to housing developers based on their Qualified Allocation Plan (QAP), a rigorous and competitive application used to determine which developers will receive the credits. Once credits are acquired, equity investors purchase an interest in the business entity generating the tax credits, namely a limited partnership or limited liability company. The equity generated from the investor’s purchase is used to fund the property development. The tax credits are redeemed annually by investors over a ten-year period following the date that the property becomes operational, or “placed in service.”
The number of tax credits, and subsequently the amount of equity raised, is calculated by computing the eligible basis, or the dollar amount of all depreciable costs of the project (which excludes the cost of land acquisition and operating reserves) minus ineligible sources of funding like grants or federal subsidies. The eligible basis is then multiplied by the percentage of eligible tax credit units in the project (at least 20 percent and up to 100 percent of all units in the building) to calculate the “qualified basis.” The investor may later claim either 9 percent or 4 percent of the qualified basis amount in tax credits

You May Also Find These Documents Helpful

  • Good Essays

    Is3350 Unit 1 Assignment

    • 1123 Words
    • 5 Pages

    Amount of the buildings' cost that has been allocated to Depreciation Expense since the time the building was acquired.…

    • 1123 Words
    • 5 Pages
    Good Essays
  • Powerful Essays

    Sleepypharma Research Paper

    • 2833 Words
    • 12 Pages

    To calculate the enhanced deduction under 170(e)(3), we must first determine if the property being donated is a “qualified contribution.” The code stipulates that a qualified contribution must be in accordance with 1221(a)(1) and 1221(a)(2). Pursuant to section1221(a)(1), the property in question is a qualified contribution and not a 1221 capital asset, because it is property that is held by the taxpayer for sale in the normal course of business. Therefore, this property is not capital gain property it is ordinary income property as defined in income tax regulation 1.170 A-4(b)(1). Under IRC 170(e)(3)(B) the amount of the charitable contribution of ordinary income property must be reduced in accordance with the following subsections to determine the final value of the deduction.…

    • 2833 Words
    • 12 Pages
    Powerful Essays
  • Satisfactory Essays

    2. On March 4, 2013 Nothing On TV Corp purchased a television studio, which included land, a…

    • 905 Words
    • 5 Pages
    Satisfactory Essays
  • Good Essays

    * Incentives provided: main residence CGT exemption; CGT 50% discount for holding property>1 yr; Various types of mortgage available; First Home saver accounts(government co-contributes equal to 17% of ur contribution)…

    • 2940 Words
    • 12 Pages
    Good Essays
  • Satisfactory Essays

    Complainant, who is African-American and who has a Housing Choice Voucher (HCV) administered by the Chicago Housing Authority (CHA), alleges that Respondents refused to rent to her based on her race and source of income. Complainant states that on May 14, 2016, she applied for an available apartment with the Terrazio Apartments at 1935 S. Wabash. Complainant says that Respondents approved her application and gave her a move-in date of May 28, 2016.…

    • 162 Words
    • 1 Page
    Satisfactory Essays
  • Good Essays

    Peca, S. (2009). Real Estate Development and Investment: A Comprehensive Approach. Hoboken, NJ: John Wiley & Sons, Inc.…

    • 584 Words
    • 3 Pages
    Good Essays
  • Good Essays

    Developers can access these incentives by constructing affordable living units on or near a new development site, converting existing off-site market-rate units to affordable units or paying a fee to the city’s affordable housing fund.…

    • 640 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    Mgmt 351 Study

    • 1394 Words
    • 6 Pages

    percentage-of-completion method of accounting for long-term construction contracts during 2012. For tax purposes, the company…

    • 1394 Words
    • 6 Pages
    Powerful Essays
  • Satisfactory Essays

    IRS Letter Rulings 200134022 deals with tax imposed on certain built-in gains (for corporations electing S status after 12/31/86). The 10-year built-in gain recognition period for Corporation will continue to be treated as commencing on the effective date of Corporation’s election to be an S corporation. After switching to c corporation (real estate investment trust), the net unrealized built-in-gain of Corporation will continue to be calculated based on the fair market value and adjusted basis of Corporation’s assets.…

    • 307 Words
    • 2 Pages
    Satisfactory Essays
  • Good Essays

    Corporate Strategy

    • 3375 Words
    • 14 Pages

    Because the gain on the land will be taxed as long-term capital gain, the sales proceeds less 15% of the appreciation must exceed $12,355.…

    • 3375 Words
    • 14 Pages
    Good Essays
  • Good Essays

    The HUD Public Housing Program was established to assist eligible low-income families, elderly and individuals with a qualifying disability. The housing for these individuals could come in several different forms such as single family houses to high rise apartments. The United States department of Housing and Urban Development otherwise known as HUD helps place Federal aid to the local housing agencies that assist low income residents at rents they could manage and live comfortably. To become eligible applicatiants must be considered low-income families or individuals. HA will determine eligibility based on gross annual income, whether the person is elderly, has a disability, or will be applying as a family. The applicant must also be a U.S. Citizen or have an eligible immigration status. HA will also check background references to insure that the family or individual would be a good tenant. HA can deny the applicant if it is determined that the tenant would cause a disruptive environment to other tenants or the community.…

    • 888 Words
    • 4 Pages
    Good Essays
  • Good Essays

    low cost housing

    • 597 Words
    • 3 Pages

    Low Cost Housing's main frame is steel structure modular house with the EPS color steel sandwich panel, rock wool, PU for the insulation. It can maximize customer require and satisfaction for the cost and quality; The roof, wall, door are all used sandwich panel, which with the function of water-proof, fire-proof, sound-insulation, heat-insulation. It can be assembled and disassembled in a very short time for project office or accommodation use, it has advantages in easy installation, low time and labor cost, being economical and environmentally friendly.…

    • 597 Words
    • 3 Pages
    Good Essays
  • Good Essays

    From a cost and benefit perspective on the voucher program; the cost starts with the family receiving the voucher. They pay 30% of their gross income towards their monthly rent. The voucher pays the landlord for the unpaid rent balance, which is the total Fair Market Rent (FMR) minus the family contribution; this equals program cost. The family is required to find its own rental and Housing Assistance Payments (HAP) agency. This agency inspects the dwelling to be sure it meets Housing Quality Standards (this is a cost for program administrators) and executes a three part lease with…

    • 612 Words
    • 3 Pages
    Good Essays
  • Powerful Essays

    St. Louis Problems

    • 1465 Words
    • 6 Pages

    Department of Housing and Urban Development “was established to provide decent and safe rental housing for eligible low-income families, the elderly and persons with disabilities” (U.S. Department of Housing and Urban Development 2017). Public housing eligibility is determined by local housing agencies, which is administered federal aid (U.S. Department of Housing and Urban Development 2017). Eligibility is determined by: “annual gross income; whether you qualify as elderly, a person with a disability, or as a family; and U.S. citizenship or eligible immigration status” (U.S. Department of Housing and Urban Development 2017). An issue with public housing is that tenants are allowed to stay as long as they comply with the lease offered by the local housing agency (U.S. Department of Housing and Urban Development…

    • 1465 Words
    • 6 Pages
    Powerful Essays
  • Better Essays

    Type of Lic Policies

    • 1742 Words
    • 7 Pages

    LIC Housing Finance Ltd. is one of the largest Housing Finance companies in India. The main objective of the Company is providing long term finance to individuals for purchase, construction, repair and renovation of new and existing houses. The Company also provides finance on existing property for both business and personal needs and gives loans to professionals for purchase, construction of Clinics, Nursing Homes, Diagnostic Centres, Office Space etc. The mission of the company is to provide secured housing finance at affordable cost, maximizing shareholders value with higher customer sensitivity.…

    • 1742 Words
    • 7 Pages
    Better Essays