How to Claim Indiana’s Low-Income Housing Tax Credits

How to Claim Indiana’s Low-Income Housing Tax Credits

Indiana’s Low-Income Housing Tax Credit (LIHTC) program is designed to promote affordable housing across the state. Claiming these credits can provide significant financial assistance for individuals and families who qualify. Here’s a comprehensive guide on how to claim Indiana’s Low-Income Housing Tax Credits.

Understanding LIHTC in Indiana

The Low-Income Housing Tax Credit is a federal program administered at the state level that incentivizes private developers to create and manage affordable rental housing. In Indiana, the program is overseen by the Indiana Housing and Community Development Authority (IHCDA).

Eligibility Requirements

To be eligible for Indiana’s Low-Income Housing Tax Credits, applicants must meet specific criteria:

  • Applicants must have low income, generally not exceeding 60% of the area median income (AMI).
  • The housing project must comply with federal and state regulations concerning tenant eligibility and affordability.
  • Developers must submit applications for credits as part of their project proposal, which includes detailed financial records and anticipated tenant occupancy.

Application Process

Claiming Indiana’s Low-Income Housing Tax Credit involves a multi-step process:

Step 1: Prepare Your Application

Gather necessary documentation, including:

  • Income verification of potential tenants.
  • Details on the property, including location, size, and features.
  • Financial projections and budgets for operating the housing project.

Step 2: Submit the Application

Complete the application form provided by the IHCDA. It must include:

  • Project description and location.
  • Developer and ownership details.
  • Evidence of funding commitments and financial viability.

Applications are usually accepted once a year, so be mindful of deadlines posted by the IHCDA.

Step 3: Review Process

Once submitted, your application will undergo a review process where the IHCDA evaluates:

  • Compliance with LIHTC guidelines.
  • Feasibility and sustainability of the proposed housing project.
  • Community impact and need for affordable housing in the area.

The IHCDA may request additional information or modifications to your proposal during this time.

Step 4: Award Notifications

After evaluation, approved projects will receive a notification of their awarded credits, indicating the amount of credits that can be claimed. Keep records of this communication for your records.

Tax Credit Claims

Once the credits are awarded, the property owner can begin claiming these credits:

Filing Taxes

When filing taxes, the property owner will report the tax credits on IRS Form 8586, which is specifically for the Low-Income Housing Credit. Ensure that:

  • You retain copies of all relevant documents, including the initial application and notifications from the IHCDA.
  • Monitor any changes in regulations or requirements for claiming the credits in future tax years.

Maintaining Compliance

It’s crucial to maintain compliance with the guidelines throughout the duration of the tax credit period, typically 15 years. Regular audits and tenant income certifications will be required to ensure ongoing eligibility for the credits. Be aware of:

  • Annual reporting requirements.
  • Compliance inspections mandated by the IHCDA.
  • Any potential penalties for non-compliance, which can include losing your tax credits.

Conclusion

Claiming Indiana’s Low-Income Housing Tax Credits is an involved process that requires careful preparation and attention to detail. By adhering to the guidelines set forth by the IHCDA and ensuring compliance with federal regulations, developers can significantly impact affordable housing in their communities while benefiting financially. For specific inquiries, consider reaching out directly to the IHCDA or consulting with a tax professional experienced in housing credits.