For developers looking to build affordable housing in Massachusetts, tax credits can be a powerful tool to reduce costs and secure financing. Two primary tax credit programs are available: the Low-Income Housing Tax Credit (LIHTC) and the Massachusetts Affordable Housing Tax Credit (AHTC).
Low-Income Housing Tax Credit
The LIHTC is a federal program administered by the Executive Office of Housing and Livable Communities (EOHLC) providing tax credits to investors in affordable multifamily rental developments. These credits incentivize private investment in affordable housing by offering a dollar-for-dollar reduction in federal tax liability. The credit period begins with the taxable year in which a project meets all requirements and extends for 15 years. Developers can claim the credit equally over this period. Overall, the LIHTC program can provide significant financial support, reducing the upfront costs of construction and making projects more attractive to investors.
Massachusetts Low-Income Housing Tax Credit (State LIHTC)
In addition to the federal LIHTC, Massachusetts offers a state-level tax credit to further encourage investment in affordable housing. This credit is available to individual taxpayers, partnerships, and corporations that invest in qualified low-income housing projects within the state. The credit is typically claimed over a five-year period, with equal installments each year. Unused credits can be carried forward for up to five years. The State LIHTC is designed to complement the federal LIHTC, giving developers even greater financial flexibility and increasing the likelihood of securing financing.
Historic Rehabilitation Tax Credit
For developers undertaking the rehabilitation of historic properties, Massachusetts provides a Historic Rehabilitation Tax Credit. This credit offers a percentage of qualified rehabilitation expenditures for income-producing historic properties. The credit is typically claimed over a five-year period, with equal installments each year. Unused credits can be carried forward for up to five years.
Federal Historic Rehabilitation Tax Credit
In conjunction with the state credit, the federal government offers a Historic Rehabilitation Tax Credit for the rehabilitation of certified historic structures. This credit provides a percentage of qualified rehabilitation expenditures and is typically claimed over a five-year period, with equal installments each year. Unused credits can be carried forward for up to five years.
Massachusetts Housing Investment Corporation (MHIC) Tax Credits
The Massachusetts Housing Investment Corporation offers tax credits to support the development and preservation of affordable housing. These credits can be used in conjunction with other state and federal credits to enhance the financial feasibility of projects.
By leveraging these tax credit programs, developers can significantly reduce the financial burden of constructing or rehabilitating affordable housing in Massachusetts while contributing to the state's efforts to increase affordable housing units. Working with an experienced attorney to navigate the complex application processes for these tax credits ensures maximum financial benefits for any affordable housing project.
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