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Form 8586 – Low-Income Housing Credit 2021

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Explore IRS Form 8586: Low-Income Housing Credit

If you’re a real estate developer or property owner who provides affordable housing for low-income households, then this form is essential for you. This general business credit can help you reduce your tax liabilities and support the growth of your business.
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irs form 8586 low-income housing credit template
This form will help you calculate your eligible credit amount based on various factors, such as the qualified basis of your buildings or units, the applicable credit percentage rate, and other adjustments. You will also be required to list your income-producing units as well as the low-income housing projects under your possession.
You must report all information accurately since errors can lead to penalties and could even disqualify you from receiving the credit. In addition, there are other forms that complement this form, such as Form 8609-A, Form 3800, Form 8611, and others.

Why Form 8586 is Relevant in the Housing Market

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.

Exploring the Contents of Form 8586

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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Calculation of the credit

This part of the form is used to calculate the LIHTC for the tax year. It requires information about the eligible basis of the property, the percentage of the credit, and the amount of the credit. You’ll need to complete this part of the form for each affordable housing project that you’re claiming the LIHTC for.

Carryover allocation

If you’re unable to use the entire LIHTC in the current tax year, you can carry it over to future tax years. This part of the form is used to allocate the carryover credit to future tax years. It requires information about the amount of the carryover credit and the tax year that it will be used.

Recapture of credit

If you’re no longer in compliance with the LIHTC requirements, you may need to recapture a portion of the credit that you’ve claimed in previous tax years. This part of the form is used to calculate the recapture amount and to report it on your tax return.

Alternative Minimum Tax (AMT) election

If you’re subject to the AMT, you may need to make an election to use the LIHTC to offset your AMT liability. This part of the form is used to make the election and to calculate the amount of the LIHTC that can be used to offset your AMT liability.

FAQ About Form 8586

Form 8586 is used to report the Low-Income Housing Credit portion of taxes due on income received from rental housing projects. The form must be filed with your annual tax return electronically or by mail.
Individuals, estates and trusts that hold an interest in a qualified low-income building can file Form 8586. Generally, they must also have claimed a low-income housing credit on their federal income tax return.
Generally, you should send your completed Form 8586 to the Internal Revenue Service (IRS) alongside your annual income tax return. Note that if you are filing electronically, you will need to submit the form alongside your e-filed return.

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