Follow Six Rules to Avoid Converting Common Areas into Commercial Space

Commercial space isn’t LIHTC basis eligible, but the IRS Code does allow for commercial use at a tax credit site. That commercial space may even be located in the same building where your low-income households live. For example, suppose a 50-unit tax credit building proposes that the entire first floor, except for the lobby to the residential elevators, be set aside for office space, retail shops, and a drug store. This would be acceptable. But the commercial space wouldn’t be included in the basis that’s tied to the credits that can be claimed.