The Low-Income Housing Tax Credit (LIHTC)

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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 http://www.ahfa.com
Alaska Housing Finance Corporation http://www.ahfc.state.ak.us
Arizona Department of Housing http://www.housingaz.com
Arkansas Development Finance Authority http://www.state.ar.us/adfa
California Tax Credit Allocation Committee http://www.treasurer.ca.gov/ctcac
Colorado Housing and Finance Authority http://www.colohfa.org
Connecticut Housing Finance Authority http://www.chfa.org
Delaware State Housing Authority http://www.destatehousing.com/
District of Columbia Housing Finance Agency http://www.dchfa.org
District of Columbia Department of Housing and Community Development http://www.dhcd.dc.gov
Florida Housing Finance Corporation http://www.floridahousing.org
Georgia Department of Community Affairs http://www.dca.state.ga.us
Housing and Community Development Corporation of Hawaii http://www.hcdch.state.hi.us
Idaho Housing and Finance Association http://www.ihfa.org
Illinois Housing Development Authority http://www.ihda.org
City of Chicago Department of Housing http://www.ci.chi.il.us/Housing
Indiana Housing and Community Development Authority http://www.state.in.us/ihfa
Iowa Finance Authority http://www.ifahome.com
Kansas Housing Resources Corporation http://www.kshousingcorp.org/
Kentucky Housing Corporation http://www.kentuckyhousing.org
Louisiana Housing Finance Agency http://www.lhfa.state.la.us
Maine State Housing Authority http://www.mainehousing.org
Maryland Department of Housing and Community Development http://www.dhcd.state.md.us
MassHousing http://www.mhfa.com
Massachusetts Dept. of Housing and Community Development http://www.state.ma.us/dhcd
Michigan State Housing Development Authority http://www.michigan.gov/mshda
Minnesota Housing Finance Agency http://www.mhfa.state.mn.us
Mississippi Home Corporation http://www.mshomecorp.com
Missouri Housing Development Commission http://www.mhdc.com
Montana Department of Commerce, Board of Housing http://housing.mt.gov
Nebraska Investment Finance Authority http://www.nifa.org
Nevada Department of Business and Industry - Housing Division http://nvhousing.state.nv.us
New Hampshire Housing Finance Authority http://www.nhhfa.org
New Jersey Housing and Mortgage Finance Agency http://www.state.nj.us/dca/hmfa
New Mexico Mortgage Finance Authority http://www.nmmfa.org
New York State Division of Housing and Community Renewal http://www.dhcr.state.ny.us
New York State Housing Finance Agency http://www.nyhomes.org
City of New York, Dept. of Housing Preservation and Development http://www.nyc.gov/html/hpd
Development Authority of the North Country (New York) http://www.danc.org
North Carolina Housing Finance Agency http://www.nchfa.com
North Dakota Housing Finance Agency http://www.ndhfa.state.nd.us
Ohio Housing Finance Agency http://www.odod.state.oh.us/ohfa
Oklahoma Housing Finance Agency http://www.ohfa.org
Oregon Housing and Community Services http://www.hcs.state.or.us
Pennsylvania Housing Finance Agency http://www.phfa.org
Puerto Rico Housing Finance Corporation http://www.gdb-pur.com/
Rhode Island Housing http://www.rihousing.com
South Carolina State Housing Finance and Development Authority http://www.sha.state.sc.us
South Dakota Housing Development Authority http://www.sdhda.org
Tennessee Housing Development Agency http://www.state.tn.us/thda
Texas Department of Housing and Community Affairs http://www.tdhca.state.tx.us
Utah Housing Corporation http://www.utahhousingcorp.org
Vermont Housing Finance Agency http://www.vhfa.org
Virgin Islands Housing Finance Authority http://www.vihfa.gov/
Virginia Housing Development Authority http://www.vhda.com
Washington State Housing Finance Commission http://www.wshfc.org
West Virginia Housing Development Fund http://www.wvhdf.com
Wisconsin Housing and Economic Development Authority http://www.wheda.com
Wyoming Community Development Authority http://www.wyomingcda.com
Source: U.S. Department of Housing and Urban Development
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