What Does a Credit Tax Apartment Mean?


The low-income housing tax credit is a federal program that was established in 1987. The purpose of the program is to provide decent apartments to tenants with low income at an affordable rent. A credit tax apartment is a unit in a credit tax property. Before applying for an apartment in a credit tax property, there are several important things that you should know. 

Low-income housing refers to a residential building or housing project whose units are rented out to tenants with low income. The rent can also be based on the size of the tenant’s family or whether or not the tenant receives a federal stipend to help with the monthly rental payment. Low-income housing units can either be managed privately by rental agencies or landlords or be managed by a housing authority.   

Credit tax apartments are found in an apartment complex whose landlord participates in the federal low-income housing tax credit program. Apartment complexes that are eligible for this program enable their landlords to claim tax credits after renting some or all of their apartments at a restricted rent to low-income tenants.  The landlords accept payment issued by the government in conjunction with the payment made by the low-income tenant.   

The credit tax program is also known as the federal low-income housing tax credit program (LIHTC). This housing program is administered by the IRS in conjunction with state housing finance agencies across the USA. The LIHTC stands out from other housing programs which are usually issued by the U.S Department of Housing and Urban Development (HUD). Landlords participating in the LIHTC program are eligible to claim tax credits from the government for 10 years for their credit tax properties as long as there are low-income tenants in their apartments.  

Do I get to claim a tax credit?

LIHTC properties may contain apartments that are not financially assisted and are available at market rate, together with units whose rent is reduced. The tax credit program allows owners of participating units to receive tax credits in exchange for keeping their apartments affordable. Tenants in a credit tax apartment also get to benefit since their rent for the same apartments will be below the market rate. To qualify for LIHTC units, however, you have to be income-eligible. 

Do landlords verify income?

For you to qualify for a credit tax apartment, your landlord or property manager has to verify your income and assets. Before applying for a credit tax apartment, therefore, you need to have your credentials in order. This program requires serious confirmation for you to qualify. This helps to prevent people with average income from renting low-income apartments. 

How is rent in a tax credit apartment calculated?

The rent in a tax credit apartment is based on the size and the number of bedrooms in the apartment. The rent is not affected by the number of people who live in the apartment. The landlord usually calculates the rent of the apartment with the assumption that each bedroom accommodates 1.5 occupants, or only one occupant in case the apartment is a studio.

For instance, the rent for a two-bedroom apartment would be based on three occupants in the apartment. A utility allowance is also included in the tax credit rent. 

Does the number of people in your household affect your eligibility? 

The number of people in your household affects your eligibility for a low-income apartment at a credit tax complex. The total income in your household should be less than the area median gross income (AMGI). This is usually based on the size of your household. However, as stated before, the rent of a tax credit apartment is not based on the actual number of people in your household. 

Do you need to sign a special lease?

When applying for a credit tax apartment, there is no need to sign a special lease. The program does not require landlords to give their low-income tenants a special lease. However, you may find a lease addendum containing clauses specific to the LIHTC program. For instance, you may find that your lease requires you to cooperate with your landlord who will be required to verify and rectify your income each year. Also, there will be a clause stating that if your landlord learns that you falsified or knowingly gave incomplete information about your income when applying for your apartment, they could terminate your lease. 

Common disqualifiers

There are several factors which may make you ineligible for a tax credit apartment. They include:

In the application process, you’ll have to submit a credit report. A poor credit report may make you ineligible.

Also, if you have a poor rental history with your previous landlords, you may be rejected as a qualifying tenant. 

Having a criminal record will also make it difficult for you to receive housing. However, this does not automatically disqualify you. In addition, if you have a history of violence, alcohol and drug abuse, you may find it difficult to qualify. 

How does a property qualify for the LIHTC?

Many properties are eligible for the LIHTC. The only problem, however, is that there is a wide variety of properties competing for the credits than the credits available since the credits are allocated based on the population of the state. For a property to qualify for the LIHTC, the property must meet one of the following conditions: 

First, 20% or more of the rental apartments should be rented to tenants earning 50% or less of the area median gross income (AMGI) based on the size of the household. 

At least 40% of the rental units should also be rented to tenants earning 60% or less of the area median gross income (AMGI) based on the size of the household.

Finally, no units should be rented to tenants earning more than 80% of the area median gross income. 

All the properties that qualify for the federal low-income housing tax credit program (LIHTC) must continue to meet one of the above income requirements for a period of 15 years. If a property does not comply with the above conditions, the value of the tax credit will be recaptured. One of the most common complaints about the LIHTC program is the fact that many of the properties in prime locations stop being available to the low-income household once the 15-year period elapses. 

Melanie Asiba

Melanie is an author. She enjoys traveling, reading and trying out new things. In addition to writing for Apartment ABC. Connect with her at [email protected]

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