Low-Income Housing Tax Credit (LIHTC) is a federal tax incentive program designed to encourage the development and rehabilitation of affordable rental housing for low-income individuals and families.
The program provides tax credits to private developers who invest in properties that meet specific income and rent restrictions. These credits are allocated on a per-project basis and can significantly reduce the developer’s tax liability, making it more financially feasible to build or renovate affordable housing.
For example, a developer who receives LIHTCs can claim a dollar-for-dollar reduction in federal income tax for a specified number of years, typically 10. This incentivizes the construction of units that are affordable for households earning below a certain percentage of the area median income (AMI).
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