HUD Issues 2017 Income Limits for HUD and Tax Credit Programs

HUD recently announced the 2017 income limits for the MTSP housing programs effective April 14, 2017. This includes low-income housing tax credits and tax-exempt bond financing. HUD advises that the income limits are effective immediately for all HUD programs, whereas the IRS allows a transition period from the date of publication to implement the new limits. According to IRS Revenue Ruling 94-57, income limits must be implemented on the effective date or no more than 45 days from the published date. This means this year’s limits must be implemented no later than May 28, 2017, for LIHTC sites.

Income limits are set by HUD to determine the eligibility of applicants for HUD’s assisted housing programs. Section 8 Fair Market Rent (FMR) area definitions are used to develop median family income estimates for each metropolitan area and non-metropolitan county. HUD income limits are calculated for every FMR area with adjustments for family size and for areas that have unusually high or low income-to-housing-cost relationships.

Low-income families are defined as families whose incomes do not exceed 80 percent of the median family income for the area. Very low-income families are defined as families whose incomes do not exceed 50 percent of the median family income for the area. Income limits for non-metropolitan areas may not be less than limits based on the state non-metropolitan median family income level.

Beginning with FY 2010 income limits published on May 14, 2010, HUD eliminated its long-standing “hold harmless” policy but limited all annual decreases to 5 percent and all annual increases to the greater of 5 percent or twice the change in the national median family income (MFI). HUD has maintained these limits to increases and decreases in income limits for FY 2017.

For FY 2017 income limits, the national MFI for the United States is $68,000, an increase of 3.5 percent compared to the national MFI for FY 2016. Twice this change is greater than 5 percent, so this higher value is used as the cap on increases, or 7 percent.

MTSP income limits. HUD also released the FY 2017 Multifamily Tax Subsidy Projects (MTSP) income limits. LIHTC sites use these income limits, which  are set at 50 percent and 60 percent of median family income. It’s important to note that LIHTC sites are held harmless from income limit reductions. The limits for the LIHTC and Bond programs may be found at https://www.huduser.gov/portal/datasets/mtsp.html.