How to Qualify for Low-Income Housing Tax Credit

To qualify for a Low-Income Housing Tax Credit apartment, your household’s gross annual income has to fall at or below the Area Median Income percentage assigned to that specific unit — most often 60 percent of AMI, though some units are set lower and some higher. You also have to clear a federal rule that bars households made up entirely of full-time students unless you fit one of the listed exceptions, and you have to document your income, assets, and household composition in detail before the property will approve you.

Eligibility is checked at the property, not by a central agency, and the exact income cap depends on where you live, how many people are in your household, and which set-aside the developer chose when the building was financed.

Income Limits Are Set by Area and Household Size

Every LIHTC property builds its income cutoffs on the Area Median Income figures that the Department of Housing and Urban Development publishes each year for every metropolitan area and county.¹ Because AMI tracks local wages, the dollar amount that qualifies a family of four in a high-cost city can be far above the limit in a rural county. HUD also adjusts the limits by household size, so a single applicant faces a lower cap than a family of four at the same property.

When a developer sets up a LIHTC project, federal law requires them to pick one of three income tests, and that choice controls who can live there:

The 20-50 test: at least 20 percent of units go to households earning 50 percent or less of AMI.
The 40-60 test: at least 40 percent of units go to households earning 60 percent or less of AMI.
The average income test: at least 40 percent of units are income-restricted, each unit assigned a limit in 10-percent steps from 20 percent to 80 percent of AMI, with the average across all designated units capped at 60 percent.²

A building using income averaging might rent some units to households at 30 percent of AMI while renting others to households earning up to 80 percent. The practical result: you could qualify at one LIHTC property and not at another a few blocks away. Ask the management office which AMI level applies to the specific unit you’re applying for, not just the building.

What Counts as Household Income

Property managers total the gross annual income of every adult who will live in the unit. Gross means everything before taxes and deductions: wages, salaries, overtime, tips, and bonuses on the earned side; Social Security, disability payments, pensions, regular child support, and alimony on the unearned side. Recurring cash gifts or ongoing financial help from family members count too.

Assets get looked at even when they aren’t producing income you spend. If you have a savings account, a retirement account, or an investment account that isn’t paying out, the property calculates an imputed income from the balance, essentially estimating what those funds could earn. That imputed figure gets added to your total for eligibility purposes.

The Full-Time Student Rule

Federal law generally bars households where every adult is a full-time student from renting a LIHTC unit. A person is a full-time student if they attend an educational institution full-time for at least five calendar months during the year, and those months do not have to run consecutively.² If even one adult in the household is not a full-time student, the rule doesn’t apply to you.

All-student households can still qualify if they fit one of these exceptions:

A single parent with children, provided neither the parent nor the children are claimed as dependents by anyone outside the household other than the children’s other parent.
A married couple eligible to file a joint federal tax return.
A household with any member receiving Temporary Assistance for Needy Families or other benefits under Title IV of the Social Security Act.
A household with any member enrolled in a government-funded job training program.
A household with any member who was previously in foster care through a state child welfare agency.

Property managers verify student status and any claimed exception every year, so keep enrollment records and supporting documents where you can pull them quickly.

Documentation to Gather Before You Apply

A LIHTC application asks for detailed proof of your finances and household. Expect to bring:

Government-issued photo ID for each adult, plus Social Security cards or birth certificates for everyone in the household including children.
Recent consecutive pay stubs, typically four to six, along with federal tax returns and W-2 forms from the most recent filing year. If you’re self-employed, plan on business records or your prior year’s return showing net income.
Award letters or benefit statements for Social Security, disability, pensions, unemployment, child support, alimony, and any other regular income.
Recent statements for checking, savings, and any investment or retirement accounts including 401(k)s and IRAs. Bring statements even for accounts producing no current income, because they still factor into the imputed-income calculation.

All of this feeds into the Tenant Income Certification, the standardized form the property uses to formally certify your eligibility. It lists every household member and every source of income and assets, and you sign it under penalty of perjury. Managers cross-check every number against the underlying documents, so a mismatch between what you write down and what your pay stubs show can sink the application.

Finding a LIHTC Property and Getting on a Waitlist

LIHTC properties are privately owned and don’t always advertise as “affordable housing.” HUD runs a searchable database of LIHTC-funded developments you can filter by state, city, or county.³ Your state housing finance agency — the body that actually awards the credits — usually keeps its own list of participating properties with contact information, and local housing authorities can often point you toward developments nearby.

Once you find a property, expect a credit check and a criminal background screening on top of the income review. Application fees are limited to the property’s actual screening cost, typically $25 to $75 per adult. Demand outruns supply almost everywhere, so waitlists can stretch for months or years. Applying at several properties at once is standard practice.

Some properties give preferences that move certain applicants up the list — veterans, elderly households, people with disabilities, and families who are homeless or being displaced are common categories. These preferences are set by the developer or the state agency, not by federal law, so ask each management office what applies before you submit.

When a unit opens, the property runs a final eligibility check to confirm nothing has changed since your original application. If everything still lines up, you sign a lease with the rent-restricted terms of your unit spelled out.

A Note on Rent

Qualifying for a LIHTC unit is not the same as qualifying for rent based on your income. LIHTC rents are set by formula from the unit’s assigned AMI level and bedroom count, capped at 30 percent of that income limit assuming 1.5 occupants per bedroom.² Your personal earnings don’t change the rent. Two tenants in identical units pay identical rent even if one earns near the cap and the other earns much less. If you also hold a Section 8 voucher, your out-of-pocket share can be lower, but the property’s posted rent is fixed by the LIHTC formula.

Staying Qualified After You Move In

Most properties recertify your income and household composition every year, which means submitting updated pay stubs, tax returns, and asset statements again. Federal law waives the annual income recertification for buildings where every single unit is a LIHTC-qualified low-income unit, but even those buildings still confirm other compliance details each year.²

If your income rises above the qualifying limit after you move in, you don’t have to leave, and your rent doesn’t go up. In mixed-income buildings that contain both LIHTC and market-rate units, your unit can lose its low-income designation once your income exceeds 140 percent of the applicable limit, in which case the property has to rent the next available comparable unit to a qualifying household. You stay put.

Household changes generally need to be reported to management: a new baby, a marriage, someone moving in or out. Adding a new adult triggers income verification for that person at the next recertification. Timing and procedures vary, so check your lease and the property’s compliance policies whenever your household changes.

1
HUD USER. Income Limits
2
Office of the Law Revision Counsel. 26 USC 42 Low-Income Housing Credit
3
HUD USER. LIHTC Database Access