Tax Credits and the HUD 223(f) Loan Program
Tax credits are incentives that allow taxpayers to deduct certain amounts from the taxes they owe the government. When it comes to the HUD 223(f) loan program, the most common tax incentive program is the Low-Income Housing Tax Credit, or LIHTC. The LIHTC allows property owners to take a 10-year tax credit on their federal income taxes, as long as they keep their property’s rents under a certain limit.
This limit is usually defined by the “60/40 rule,” meaning that 40% of the property’s units must be reserved for tenants earning less than or equal to 60% of the area median income (AMI), or by the “20/50” rule, meaning that 20% of the property’s units must be reserved for tenants earning less than or equal to 50% of the area median income.