What Is Form 8609 and How Is It Filed?

Form 8609, Low-Income Housing Credit Allocation and Certification, is the document building owners use to claim the Low-Income Housing Tax Credit (LIHTC). This credit is a dollar-for-dollar reduction in federal income tax liability, designed to incentivize the development of affordable rental housing. The LIHTC program is a federal incentive administered at the state level, making Form 8609 a bridge between state agency allocation and federal tax filing. Without a properly issued and filed Form 8609, an owner cannot claim the tax credit.

Obtaining and Understanding Form 8609

A building owner does not download Form 8609 from the IRS website. Instead, the form is issued to the owner by a state or local Housing Credit Agency (HCA). These agencies are authorized to distribute federal low-income housing tax credits within their jurisdictions. The HCA is responsible for reviewing applications from developers and allocating the limited supply of tax credits to qualifying projects.

Once a project is approved and placed in service, the HCA completes Part I of Form 8609 and sends the original document to the building owner. This part of the form contains binding information, including the credit allocation date, the maximum applicable credit percentage, and the maximum qualified basis for the building. The HCA also assigns a unique Building Identification Number (BIN) for IRS tracking and compliance. The owner must review these entries, as they dictate the potential tax benefit.

Information Required for Owner Certification

After receiving Form 8609 with Part I completed, the building owner must complete Part II to certify that the building meets all qualifications. This involves providing key information and making several irrevocable elections.

Placed-in-Service Date and Compliance Period

The owner must establish the building’s placed-in-service date, which is the date the first unit is certified as ready for occupancy. This date determines the start of the 10-year credit period and the 15-year compliance period, during which the property must adhere to program rules.

Minimum Set-Aside Election

The owner must certify which minimum set-aside test the project satisfies to ensure a portion of the units are occupied by low-income tenants. The owner must elect one of three tests. The first two options are the 20-50 test, requiring at least 20% of units to be occupied by tenants with incomes at or below 50% of the area median gross income (AMGI), and the 40-60 test, which requires 40% of units for tenants at or below 60% of AMGI.

A third option, the Average Income Test, requires at least 40% of units to be occupied by tenants whose income averages 60% or less of AMGI, with specific income limits for each unit. The choice of test is declared on the form and commits the project to that standard for the entire compliance period.

Irrevocable Elections and Basis Calculation

Part II is also where the owner makes several irrevocable elections. One election is choosing the first year of the credit period, which can be the year the building is placed in service or the following year. Another is whether to treat the building as part of a deep rent-skewed project, which involves a more complex set of income and rent restrictions.

The owner must also calculate the building’s eligible basis and the applicable percentage. The eligible basis includes the cost of construction or rehabilitation but excludes land costs. For buildings placed in service after 2020, a permanent minimum credit rate of 4% applies to acquisition credits and tax-exempt bond-financed projects.

Filing Form 8609 with Your Tax Return

Once the owner completes and signs Part II, the original Form 8609 must be submitted to a designated IRS processing unit. A copy of that submitted form must then be attached to the owner’s federal income tax return for the first year of the credit period. The specific return it attaches to depends on the owner’s entity structure, such as Form 1040 for an individual or Form 1120 for a corporation.

The filing of Form 8609 is linked to Form 8586, Low-Income Housing Credit. While Form 8609 certifies the building’s qualification for the credit, Form 8586 is used each year to calculate and claim the credit on the tax return. The information from the certified Form 8609 provides the necessary data to complete Form 8586.

Annual Reporting and Compliance

After the initial filing, the owner’s responsibilities continue for the 15-year compliance period. To document ongoing eligibility, owners must file Form 8609-A, Annual Statement for Low-Income Housing Credit, for each year of this period. This form is attached to the owner’s federal tax return annually and certifies that the building continues to meet the program’s requirements.

Form 8609-A requires the owner to report the building’s qualified basis at the end of the tax year and confirm the property has not fallen out of compliance. The IRS uses this form to monitor the project’s adherence to LIHTC rules. A separate Form 8609-A is required for allocations related to a building’s acquisition and for those related to its rehabilitation.

This annual reporting is necessary to avoid credit recapture. If a building fails to meet low-income occupancy requirements or is disposed of before the end of the 15-year period, the IRS can recapture a portion of the credits previously claimed. This recapture is calculated using Form 8611, Recapture of Low-Income Housing Credit.