Calculating Housing Tax Credits

Information by State  Print version   In This Section Calculating Housing Tax Credits   Calculating the Qualified Basis   Housing Tax Credit Rates   Determining the Value of Housing Tax Credits

In the first topic of this module, we looked at the basic components of the Low Income Housing Tax Credit (LIHTC) Program. In this topic, we will examine how to calculate the amount of equity that can be raised from the sale of housing tax credits.

The annual amount of housing tax credits is determined by multiplying the qualified basis (the amount of development costs eligible for credits) by the applicable tax credit rate (approximately nine, or four, percent).

After completing the topic, you will be able to:

• Determine total costs eligible for credits (the eligible basis);
• Determine the adjustment to this basis, on the percentage of the property set-aside for low-income households (the qualified basis);
• Determine the tax credit rate for which a project is eligible; and
• Determine the amount of credits that would be raised by the developer, and the equity raised through the sale of these credits.

This topic covers the following subjects:

• Calculating the Qualified Basis
• Housing Tax Credit Rates
• Determining the Value of Housing Tax Credits: An Example