The Low-Income Housing Tax Credit (LIHTC)


The Low-Income Housing Tax Credit (LIHTC) is the most important resource for creating affordable housing in the United States today.

Created by the Tax Reform Act of 1986, the LIHTC program gives State and local LIHTC-allocating agencies (see the table below) the equivalent of nearly $5 billion in annual budget authority to issue tax credits for the acquisition, rehabilitation, or new construction of rental housing targeted to lower-income households.

An average of almost 1,400 projects and 103,000 units were placed in service in each year of the 1995 to 2006 period

How Do Housing Tax Credits Work?

The LIHTC Program, which is based on Section 42 of the Internal Revenue Code, was enacted by Congress in 1986 to provide the private market with an incentive to invest in affordable rental housing. Federal housing tax credits are awarded to developers of qualified projects. Developers then sell these credits to investors to raise capital (or equity) for their projects, which reduces the debt that the developer would otherwise have to borrow. Because the debt is lower, a tax credit property can in turn offer lower, more affordable rents.
Provided the property maintains compliance with the program requirements, investors receive a dollar-for-dollar credit against their Federal tax liability each year over a period of 10 years. The amount of the annual credit is based on the amount invested in the affordable housing. Before we go on, let's take a look at the difference between tax credits and tax deductions:

Credits versus Deductions

Credits: Tax credits are subtracted directly from one's tax liability. Credits reduce tax liability dollar-for-dollar.For example:A $1,000 credit in a 15% tax bracket reduces tax liability by $1,000.

Deductions: Tax deductions are subtracted from a taxpayer's total income to compute his or her tax base. Deductions reduce tax liability by the amount of the deduction times the tax rate.For example:A $1,000 deduction in 15% tax bracket reduces taxable income by $1,000, thereby reducing tax liability by $150.
As the examples illustrate, tax credits can have a much larger impact than tax deductions.

LIHTC Database: List of LIHTC-Allocating Agencies Providing Data for the LIHTC Database and their Web Addresses
Agency Name Agency Web Address
Alabama Housing Finance Authority
Alaska Housing Finance Corporation
Arizona Department of Housing
Arkansas Development Finance Authority
California Tax Credit Allocation Committee
Colorado Housing and Finance Authority
Connecticut Housing Finance Authority
Delaware State Housing Authority
District of Columbia Housing Finance Agency
District of Columbia Department of Housing and Community Development
Florida Housing Finance Corporation
Georgia Department of Community Affairs
Housing and Community Development Corporation of Hawaii
Idaho Housing and Finance Association
Illinois Housing Development Authority
City of Chicago Department of Housing
Indiana Housing and Community Development Authority
Iowa Finance Authority
Kansas Housing Resources Corporation
Kentucky Housing Corporation
Louisiana Housing Finance Agency
Maine State Housing Authority
Maryland Department of Housing and Community Development
Massachusetts Dept. of Housing and Community Development
Michigan State Housing Development Authority
Minnesota Housing Finance Agency
Mississippi Home Corporation
Missouri Housing Development Commission
Montana Department of Commerce, Board of Housing
Nebraska Investment Finance Authority
Nevada Department of Business and Industry - Housing Division
New Hampshire Housing Finance Authority
New Jersey Housing and Mortgage Finance Agency
New Mexico Mortgage Finance Authority
New York State Division of Housing and Community Renewal
New York State Housing Finance Agency
City of New York, Dept. of Housing Preservation and Development
Development Authority of the North Country (New York)
North Carolina Housing Finance Agency
North Dakota Housing Finance Agency
Ohio Housing Finance Agency
Oklahoma Housing Finance Agency
Oregon Housing and Community Services
Pennsylvania Housing Finance Agency
Puerto Rico Housing Finance Corporation
Rhode Island Housing
South Carolina State Housing Finance and Development Authority
South Dakota Housing Development Authority
Tennessee Housing Development Agency
Texas Department of Housing and Community Affairs
Utah Housing Corporation
Vermont Housing Finance Agency
Virgin Islands Housing Finance Authority
Virginia Housing Development Authority
Washington State Housing Finance Commission
West Virginia Housing Development Fund
Wisconsin Housing and Economic Development Authority
Wyoming Community Development Authority
Source: U.S. Department of Housing and Urban Development
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