IRS Guidance Clarifies How to Determine LIHTC Income Limits for Average Income Test

Thursday, January 30, 2020 - 1:00pm

The Internal Revenue Service (IRS) issued guidance Wednesday that clarifies how to determine the income limits in the average income test for low-income housing tax credit (LIHTC) purposes. Rev. Rul. 2020-4 describes how to calculate the income limits for the average income test and affirms continued use of U.S. Department of Housing and Urban Development (HUD) limits for very low-income families when calculating the LIHTC income limits of 50 and 60 percent of the area median gross income. Income limits for LIHTC properties should be calculated of the HUD published very low income (VLI) limit and calculated in a linear manner (e.g. a 30 percent income limit would be 60 percent of VLI). The ruling also addresses its application for a credit amount allocated before the guidance was published and a tenant’s income exceeds the amount otherwise required by the ruling.