The Low Income Housing Tax Credit Program (LIHTC) provides federal income tax credits to individuals or organizations that develop affordable housing through either new construction or acquisition and rehabilitation. The tax credits provide a dollar-for-dollar reduction in the developer's tax liability for a 10-year period. Tax credits can also be used by nonprofit or public developers to attract investment to an affordable housing project by syndicating or selling the tax credit to investors. This program is a resource provided by the Internal Revenue Service.
In order to receive tax credits, a developer must set aside and rent restrict a number of units for occupancy by households below 60 percent of the area median income. These units must remain affordable for a minimum of 30 years.
In addition to tax credits, the financing gap for certain LIHTC projects may be filled with a below market rate HOME loan. Tax credits and rental HOME loans are awarded annually through a competitive application process according to the state's Qualified Allocation Plan.