Form 8586 is a federal tax form that provides a tax credit to developers and property owners who provide affordable housing to low-income households. This form was created to encourage the development and preservation of affordable housing by offering a tax incentive to property owners. The credit is calculated as a percentage of the eligible basis of the property, which is the cost of the property minus the value of the land.
The Low Income Housing Tax Credit (LIHTC) program is the most extensive federal program for affordable housing production in the United States. The program has successfully created and preserved over 3 million affordable rental units across the country between 1987 and 2020. As a result, it has become a crucial tool for addressing the affordable housing crisis in the country.
By filing Form 8586, you can claim the LIHTC for your affordable housing projects. This credit can be used to offset your federal tax liabilities or to claim a refund. The LIHTC is a dollar-for-dollar reduction in your tax liability in exchange for developing affordable rental housing.
The LIHTC is available to developers and property owners who meet certain requirements, such as tenant income restrictions and rent limitations. The credit is also subject to annual compliance monitoring to ensure that the affordable housing units remain available to low-income households.
Form 8586 has several fields, each of which serves a specific purpose. The first line asks for your name as shown on the return, then the identifying number. It’s important to keep your details consistent between forms to ensure accuracy.
The second part of the form includes several calculations to determine the eligible basis and credit amount of your project. First, you will be asked for the number of Forms 8609-A attached. This form is for the Annual Statement for Low-Income Housing Credit. The next section requires you to input information about your property, such as its qualified basis, the applicable credit percentage rate and other adjustments.
There are also instructions regarding how to allocate low-income housing credit on estates or trusts. If the estate or trust is subject to the passive activity rules, include any low-income housing credits from passive activities disallowed for prior years and carried forward to this year.
Complete Form 8582-CR, Passive Activity Credit Limitations, to determine the allowed credit that must be allocated between the estate or trust and the beneficiaries. For details, see the Instructions for Form 8582-CR.
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