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 | |
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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 |