Low Income Housing Tax Credit (LIHTC or Housing Tax Credit) program has been made a permanent element of chapter 42 of the Federal Income Tax Code. Owners of Low Income Housing Tax Credit Properties receive tax credits for a portion of the construction/renovation cost. Tax credits can be used to directly reduced federal income taxes. (Tax deductions reduce taxable income and thereby indirectly reduce income taxes.)
Provisions of the Low Income Housing Tax Credit program require a market study be prepared as part of the application process administered by the state. (Each state in the U.S. receives a defined proportion of tax credits. A state department administers the program in each state. There are typically applications for at least three times the volume of tax credits available. Credits are allocated by the state department.)
Low Income Housing Tax Credit market study requirements vary from state to state. In addition, they tend to change from year to year. Over the past 15 years, the market study required for Low Income Housing Tax Credit properties has become much more detailed.
A Low Income Housing Tax Credit market study covers all issues in a typical market study. In addition, since some of all the units are allocated to households earning up to 50% or 60% of the median household income, additional review is necessary to determine the depth of market for this segment of the population.
Low Income Housing Tax Credit appraisals vary from typical appraisals in several ways. They consider the effect of the land use restriction agreement (LURA) and they include multiple market values (as completed, as stabilized, and as though not subject to the LURA).
The appraisal division of O’Connor & Associates is a national provider of commercial real estate appraisal services including single family litigation support, property appraisals, cost segregation studies, due diligence, insurance valuations, feasibility studies, financial modeling, gift tax valuations, highest and best use analyses, casualty loss valuations and HUD map market studies.
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