State updates low-income housing tax credit caps
BULLHEAD CITY — The Arizona Department of Housing has released its Low Income Housing Tax Credit program update.
The Low-Income Housing Tax Credit, rather than a direct subsidy, encourages investment of private capital in the development of rental housing by providing a credit to offset an investor’s federal income tax liability. A low-income-housing tax credit is a dollar-for-dollar credit against the federal income tax liability of the owner (developer or investor) of a low-income-housing development. Tax credits that are allocated to a development are claimed in equal amounts for a 10-year period. The rental property generating the credit must remain in compliance with the program guidelines and rent restriction requirements for a period of not less than 30 years from the first taxable year of the credit period.
The figures that the ADOH used are derived from the U.S. Department of Housing and Urban Development Median Income Charts which was effective April 24.
According to the ADOH, for a one-person household in a zero-bedroom unit who earns $22,920, the rent is to be capped at $573; salary of $19,100, rent is to be capped at $477; salary of $15,280, rent is to be capped at $382; salary of $11,460, rent is to be capped at $286; and salary of $7,640, rent is to be capped at $191.
For a one-bedroom unit, the combined salary of two people is used to determine the rent. A salary of $26,2160, rent is to be $613; salary of $21,800, rent is to be $511; salary of $17,440, rent is to be $409; salary of $13,080, rent is to be $306; salary of $8,720, rent is to be $204.
For a two-bedroom unit, the combined salary of a three-person household is used to determine the rent. A salary of $29,460, rent is to be $850; salary of $24,550, rent is to be $613; salary of $19,640, rent is to be $491; $14,730, rent is to be $368; salary of $9,820, rent is to be $245.
For a three-bedroom unit, the average combined salary of four- and five-person households are used to determine the rent. Salary average of $34,020 (four people $32,700; five people $35,340), rent is to be $850; salary average of $28,350, rent is to be $708; average salary of $22,680, rent is to be $567; average salary of $17,01, rent is to be $425; average salary of $11,340, rent is to be $283.
In order to be considered for tax credits in Arizona, the proposed development must involve new construction, substantial rehabilitation or acquisition and substantial rehabilitation.
A development qualifies for low-income-housing tax credits if it is residential rental property and meets one of the following requirements:
At least 20% of the residential units in the development are both rent-restricted and occupied by individuals whose income is 50% or less of the area median gross income or at least 40% of the residential units in the development are both rent-restricted and occupied by individuals whose income is 60% or less of the area median gross income.
Tax credits may be claimed only on units that have been set aside for participation under the program. Since tax credits are awarded on a competitive basis, ADOH’s Qualified Allocation Plan encourages “targeting” of the units to income levels lower than the federal limits describe.