HUD Issues 2023 Income Limits for Tax Credit Programs

HUD Issues 2023 Income Limits for Tax Credit Programs

This year’s limits must be implemented no later than June 29, 2023.


This year’s limits must be implemented no later than June 29, 2023.


On May 15, HUD released the 2023 income limits for the Multifamily Tax Subsidy Projects (MTSP) housing programs. MTSPs, a term coined by HUD, are all Low-Income Housing Tax Credit projects under Section 42 of the Internal Revenue Code and multifamily projects funded by tax-exempt bonds under Section 142 (which generally also benefit from LIHTC). These projects may have special income limits established by statute. You can find the income limits at

HUD typically releases income limits in early April. However, this year, the release was delayed because of the lack of 2020 American Community Survey (ACS) data due to the impact of the COVID-19 pandemic on data collection. This year, the cap on income limits is 5.92 percent.

If you’ve found that the income limits in your area have increased, check any files denied over the past few months to see if any slightly over-income households may qualify under the new limits.

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 that this year’s limits must be implemented no later than June 29, 2023, for LIHTC sites.

Site owners and managers use these figures provided by HUD to determine the income eligibility of low-income tenants in accordance with LIHTC requirements. For the LIHTC programs, HUD publishes income limits from 20 percent to 80 percent of area median income (AMI) for one- to eight-person families to accommodate projects using the income-averaging set-aside. In addition, when applicable, MTSP HERA Special Income Limits are also posted.

Households must be income qualified at move-in, and income changes after move-in don’t affect a household’s eligibility to remain in the low-income unit but may affect leasing requirements for other units at the site. Income requirements are affected by:

  • The maximum income limit for qualified low-income households, as determined by the owner’s minimum set-aside election;
  • The number of units that must be affordable to, and inhabited by, qualified households, as determined by the minimum set-aside election and by the applicable fraction of low-income units; and
  • The number of years low-income units must be inhabited by qualified households, as defined in the site’s extended use agreement.

We’ll go over how the owner’s minimum set-aside choice made on IRS Form 8609 relates to the income limits that apply to a LIHTC site.

Maximum Income Limit

In the first year of tax credits, the owner chooses to rent a minimum number of units at rents affordable to households with incomes within a specified income limit. This is called the minimum set-aside, and it’s defined by the following tests:

  • 20-50 test: 20 percent of units must be rented to households with incomes at 50 percent of AMI;
  • 40-60 test: 40 percent of units must be rented to households at 60 percent of AMI;
  • Average income test: At least 40 percent of units are rent restricted, with an average income limit of 60 percent of AMI and with a maximum income limit no higher than 80 percent of AMI. The maximum income limit of any unit included in the average must be 20, 30, 40, 50, 60, 70, or 80 percent of the area median gross income.

The site owner makes the minimum set-aside choice on the IRS Form 8609 when claiming the first year of tax credits. Once an election has been made, it’s irrevocable throughout the compliance and extended use periods. The minimum set-aside election determines the income limit applied to all the low-income units at the site. Maximum income limits are calculated as a percentage of the area median income and are adjusted by household size. Area median incomes are calculated by the federal government on an annual basis to reflect changes in the economy.

HERA Requirements

In general, LIHTC sites use the MTSP income limits, developed to meet the requirements of the Housing and Economic Recovery Act (HERA) of 2008. And sites placed in service before Jan. 1, 2009, may be eligible to use HERA special limits, if they’re also located in qualified counties.

HERA includes two measures to protect LIHTC owners from falling median incomes that would otherwise force a drop in income and rent limits:

Hold harmless policy. HERA applies this to income and rent limits for all LIHTC sites. It protects the limits from dropping after a project has been placed in service. In other words, the limits in effect at an existing project won’t be forced downward in years when the area median income drops, causing that year’s MTSP limits to decline. However, the new, lower MTSP limits will be in effect for any new LIHTC projects that were not already in service during the previous year.

Special HERA limits. HERA special limits apply only in those counties where MTSP income and rent limits would have dropped in 2009 due to dropping area median incomes, but where the hold harmless policy was applied to stop them from doing so. Within those qualified counties, the HERA special limits apply only to those LIHTC projects that were in service before Jan. 1, 2009, and so would have been affected if the hold harmless policy wasn’t applied. HUD identifies these income limits in the MTSP tables and documentation systems as “HERA Special” and states they are only for use by sites in service in 2007 or 2008.

Sites that have been refinanced with a new round of tax credits after 2009 no longer qualify for HERA special incomes and rents because their placed-in-service date is reestablished with the new LIHTC allocation, and they’re no longer considered to have been in service prior to 2009.

Multiple Building Election

For sites with multiple buildings, the placed-in-service date is an important consideration when selecting income limits because the date affects application of HERA’s hold harmless policy. Each building at an LIHTC site has its own building identification number (BIN) and its own placed-in-service date. As such, the owner’s election of whether buildings will or won’t be treated as part of a multiple-building project can affect the application of income limits at the project.

Example: Suppose the owner elected to treat a building as part of a multiple-building-project, by checking yes to item 8(b) on the IRS Form 8609. Then, the project’s placed-in-service date is the date the first building in the project is placed in service. If the owner elected to not treat a building as part of a multiple-building-project, by checking no to item 8(b) on the IRS Form 8609, then each building (BIN) where this election is made is considered a separate project, and the income limit applicable is based on the building’s placed-in-service date.

Other Financing Sources

Owners with projects that qualify for HERA special limits under the LIHTC program should also take care that they’re not required to use more restrictive limits by other housing programs tied to their site.

Example: Where sites have other sources that also carry income and rent limits, owners must use the most restrictive limits that apply to that unit. If a site has both LIHTC and HOME funding, it may qualify to use HERA special limits for any LIHTC units at the site that don’t use HOME funds. However, the site’s HOME units are also bound to HOME income and rent limits. Any units that are covered by both HOME and tax credits must compare the HOME limits to the HERA special limits, and use whichever is most restrictive.