Understand Three Events to Minimize Tax Credit Recapture Liability

Understand Three Events to Minimize Tax Credit Recapture Liability



One of the biggest concerns owners and managers face is housing tax credit recapture. Under Section 42 of the Internal Revenue Code, low-income housing tax credits are allocated to a site annually over a 10-year period. But these tax credits are subject to a 15-year compliance period. This means, because credits are earned over 15 years and claimed over 10 years, there’s a portion of the credits being claimed in the first 10 years that hasn’t yet been earned. These unearned credits in the first 10 years are referred to as the accelerated portion of the credits.

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