How to Calculate the Low Income Housing Tax Credit (LIHTC)

A property’s low income housing tax credits (Section 42 LIHTC) can be calculated by using a three-step process: 1. Determine the “eligible basis” (the total cost basis that is eligible for consideration in the calculation of the “qualified basis.”) 2. Calculate the “applicable fraction” and “qualified basis” (the percentage of the property that is dedicated to affordable housing, and the total cost basis that is eligible for credits based upon…

LIHTC Applicable Federal Rate (AFR) Update

The Applicable Federal Rate (AFR) is used as the Low Income Housing Tax Credit (LIHTC) “Applicable Percentage” that determines the eligible basis of tax credit properties. The AFR is reported monthly by the Internal Revenue Service for both the 9% and 4% tax credits. AFR’s for Section 42 tax credit properties since the year 2000 are listed below. (Please note the comments below re: legislative changes to the 9% credit.)…