In this video, I walk you through how the IRS calculates the 4% and 9% rates for LIHTCs or Low Income Housing Tax Credits.

To get straight to the point, tax credits are purchased in exchange for the ability to utilize them over a 10-year period. The IRS backs into what the annual tax credits should be by applying a discount rate to the 10 years of tax credits so that the present value of the tax credits equals 30% of the eligible basis for 4% credits or 70% of the eligible basis for the 9% credits.

In this video we cover how the IRS goes through this process.

This is more of a Deep Dive as I don’t believe there is any use for this in the professional world other than to have some context about how these numbers are derived. But I thought it was interesting enough to share.

The original post on how to calculate LIHTCs is here:
   • How To Calculate Low Income Housing T...  

You can also check out the post on our website Adventures In CRE (www.AdventuresInCRE.com) by clinking on the link below: www.AdventuresInCRE.com/LIHTC