Section 42 Housing Requirements

If the applying household is determined to be income eligible then it is.

Section 42 housing requirements. The section 42 low income housing tax credit program also called the rental housing tax credit program is a federal program governed by the internal revenue service irs. Overview of the irc 42 program the taxpayer agrees to provide low income housing for at least thirty years. The program regulations are under section 42 of the internal revenue code.

Asset income checking accounts savings accounts retirement accounts and other bank accounts cash on hand. It provides tax credits for investors who build affordable housing. In exchange for the tax credit the property owner must agree to restrict occupancy to program eligible households see part 2 below to follow program rent restrictions see part 3 below and to.

In order to receive the credit the developers agree to maintain properties in a safe and decent condition plus maintain income and rent restrictions while they are receiving the credit. The tax credit encourages developers to build affordable housing to meet the needs of the community. Section 42 units are income restricted for households at or below 30 40 50 or 60 of area median income.

In exchange for the investment in low income housing the taxpayer will receive tax credits for each of ten years which is known as the credit period. Properties financed under section 42 are required to house a percentage of residents earning less than 60 percent of the area s median income capping qualified participants rent at a fixed amount. Section 42 housing is subsidized housing and a part of a federal tax program that allows builders and developers to provide affordable housing.

For purposes of section 42 h of such code such building shall be treated as having allocated to it a housing credit dollar amount equal to the dollar amount appearing in the clause of subparagraph b in which such building is described. The section 42 application typically works like a standard rental application but takes a wide and thorough variety of income factors into account including. The residents who live in section 42 units must be income and program eligible similar to residents who live in rental assistance developments.

Section 42 of the internal revenue code addresses two issues. The purpose of the program is to provide a tax credit to property owners developers to create affordable rental housing. Developers then receive a federal tax credit from the government.