The Low-Income Housing Tax Credit (LIHTC) offers tax credits to real estate developers for constructing, purchasing, or renovating rental housing for low-income individuals and families. A LIHTC-certified professional determines whether applicants are eligible for the Low-Income Housing Tax Credit and ensures that tax credit properties remain in compliance with IRS, State Housing Finance Agencies, and HUD (Housing and Urban Development) regulations. RBT CPAs, a leading accounting firm in the Hudson Valley, can provide this service to real estate developers with LIHTC properties or those looking to apply for the program.
What is the Low-Income Housing Tax Credit?
The Low-Income Housing Tax Credit (LIHTC) program is used to create affordable housing for low-income families via residential rental real estate development. The project can be solely low-income, or combined with market rate units as part of a mixed-income development. The LIHTC can be used for new construction, rehabilitation, or acquisition of rental properties. The program benefits families seeking quality affordable housing while also creating opportunities for developers and investors to achieve a profit. For every dollar of credit received, investors can deduct a dollar from their tax liability over a 10-year period.
Due to the ongoing nationwide housing crisis, the LIHTC program is arguably more important now than ever. According to recent U.S. Census data, nearly 50% of all renters are considered “cost-burdened,” meaning they spend more than 30% of their income on housing; over 25% are deemed “severely cost-burdened,” spending more than 50% of their income on housing. The Low-Income Housing Tax Credit program is the primary source of affordable housing creation in the United States.
What is the CPA’s Role?
The LIHTC program is very complex, presenting many administrative hurdles and compliance requirements. If LIHTC properties do not remain in compliance, previously received tax credits may be recaptured, meaning the recipient must pay at least a portion of the credits back, plus interest. To avoid the recapture of tax credits, it is imperative to work with a Certified Public Accountant (CPA) versed in all stages of a LIHTC project who can ensure proper planning and review.
LIHTC-certified professionals complete a comprehensive certification course followed by a five-hour examination. CPAs with this certification possess a thorough knowledge of the LIHTC program including eligibility requirements, IRS and HUD regulations and guidance, occupancy requirements, calculations, annual recertification processes, and more. Using their specialized knowledge and training, a LIHTC-certified CPA will ensure that LIHTC properties remain in compliance with the program’s many complex and ongoing regulations.
That’s where we can help.
RBT CPAs is prepared to guide our real estate clients through the complexities and requirements of the LIHTC program. We offer specialized accounting, audit, tax, and consulting services for the affordable housing industry, including: annual financial statement audits, reviews and compilations and annual tax filings; due diligence; project final cost and eligible basis certifications; 95/5 test; 10% and 50% tests; capital account analysis; tenant file agreed-upon-procedures; financial forecasts; tax planning; and HUD audits and compliance.
Learn More
To learn more about how we can help you with your LIHTC project, get in touch with one of our experts. RBT CPAs Client Advisory Partner Ross Trapani, CPA is a certified Tax Credit Specialist. Ross earned his certification through the National Center for Housing Management, an industry leader in providing high-quality specialized certifications to professionals serving the housing industry. To learn more about the Tax Credit Specialist certification, you can visit the NCHM website. For information regarding the LIHTC and how RBT can help, email Ross Trapani at rtrapani@rbtcpas.com.
RBT CPAs, a leading accounting firm in the Hudson Valley, has been proudly serving businesses in the Hudson Valley for over 50 years. To learn more about our expert accounting, tax, audit, and advisory services, contact us today.