Qualified Census Tract (QCT): Basis Boost and Bond Rules

A Qualified Census Tract, or QCT, is a neighborhood-sized area that the Department of Housing and Urban Development designates each year based on low household incomes or high poverty. The designation matters for two reasons. Affordable housing developers who build or rehabilitate a project inside a QCT get a 130 percent basis boost on the Low-Income Housing Tax Credit, which produces meaningfully larger credits for the same construction spend. Homebuyers financing a purchase in a QCT with a mortgage revenue bond get around several restrictions that apply everywhere else. HUD refreshes the list every fall, and a tract’s status can change from one year to the next.¹

How a Tract Qualifies

A tract is eligible under either of two tests. The income test is met if at least 50 percent of households in the tract earn less than 60 percent of area median gross income. The poverty test is met if the tract’s poverty rate is at least 25 percent. Satisfying one is enough.² HUD draws the underlying numbers from multi-year American Community Survey data rather than the decennial census, because the 2020 Census did not collect household income.¹

Eligibility alone does not guarantee designation. The combined population of all QCTs within a single metropolitan statistical area is capped at 20 percent of that area’s total population, and the same 20 percent cap applies separately to each nonmetropolitan portion of a state.³ When more tracts meet the thresholds than the cap allows, HUD ranks them by poverty rate and income and works down the list until adding the next tract would push past 20 percent.⁴ So a low-income neighborhood in a large metro area can meet the statutory test on paper and still not carry the designation.

The 130 Percent Basis Boost

The core financial benefit of QCT status is the boost to eligible basis under the Low-Income Housing Tax Credit. When a building sits in a QCT, its eligible basis is treated as 130 percent of actual qualified costs, and the annual credit flows from that inflated figure. A project with $10 million in eligible costs is calculated as if the costs were $13 million.⁵ The statute treats new construction and rehabilitation the same way, so the full 130 percent applies to a qualifying rehab.⁶

Difficult Development Areas, designated by HUD based on high construction and utility costs relative to area incomes, trigger the identical 130 percent boost. A tract cannot be both a QCT and a DDA in the same year, and a developer whose project sits in a QCT does not need to check DDA status because the credit consequence is the same.¹ A state housing credit agency can also grant the 130 percent boost to a project outside any QCT or DDA if the agency determines the project needs the boost to be financially feasible, but that discretionary authority applies only to competitively allocated credits, not to projects financed with tax-exempt bonds.⁵

When the Designation Has to Be in Place

A project locks in the basis boost if the tract carries QCT status either at the time the building is placed in service, or at the time the developer received a binding commitment or reservation of credits from the state agency. Either moment is enough, which shields a project from losing the benefit when a tract drops off the list mid-construction.⁷

There is also a 730-day grace rule for developers who submitted a complete application before a new list took effect. The prior year’s designation stays valid as long as the credit allocation or bond issuance and the placed-in-service date both fall within 730 days of that application. A “complete application” is one requiring no more than minor clarification for the agency to act on the credit or bond request.⁸ New designations themselves take effect on January 1 of the year they cover; the 2026 list, for example, applies to allocations made after December 31, 2025.¹

What QCT Status Does for Mortgage Revenue Bonds

If you are buying a home financed through a qualified mortgage bond program, a house in a QCT counts as a “targeted area residence,” which loosens three normal restrictions.⁹

The maximum purchase price rises from 90 percent to 110 percent of the average area purchase price.
The first-time homebuyer requirement is waived, so a buyer who owned a principal residence in the prior three years can still qualify.
Up to one-third of targeted area financing can be issued without regard to normal income caps, and the rest qualifies at 140 percent of median family income instead of the standard threshold.

One thing to watch: the QCT definition for mortgage revenue bond purposes is not the same as the LIHTC definition. For bonds, a QCT is a tract where 70 percent or more of families earn 80 percent or less of statewide median family income, drawn from decennial census data. So a tract on HUD’s LIHTC list does not automatically count as a targeted area for a bond-financed mortgage.⁹

How to Check a Specific Address

HUD runs an online mapping tool at huduser.gov where you can enter a street address and see whether it falls inside a designated QCT. The current version covers both 2025 and 2026 designations, and you have to pick the correct year because status can shift year to year.¹⁰ The 2026 map uses tract boundaries from the 2020 decennial census, so older maps drawn on 2010 boundaries will not align.

HUD also posts downloadable PDF lists of designated QCTs by metropolitan and nonmetropolitan area, along with archived lists going back more than a decade.¹¹ The archives matter when a project needs to document QCT status as of an earlier allocation date rather than the current one.

1
Federal Register. Statutorily Mandated Designation of Difficult Development Areas and Qualified Census Tracts for 2026
2
Office of the Law Revision Counsel. 26 USC 42 – Low-Income Housing Credit
3
Legal Information Institute. 26 USC 42(d)(5) – Special Rules for Determining Eligible Basis
4
HUD USER. QCT Table Generator – QCT Designation Algorithm
5
Office of the Law Revision Counsel. 26 USC 42 – Low-Income Housing Credit
6
Internal Revenue Service. IRC 42 Low-Income Housing Credit Audit Technique Guide – Part III Eligible Basis
7
HUD USER. QCTs/DDAs and Construction Delays Due to COVID-19
8
Federal Register. Statutorily Mandated Designation of Difficult Development Areas and Qualified Census Tracts for 2021
9
Office of the Law Revision Counsel. 26 USC 143 – Mortgage Revenue Bonds Qualified Mortgage Bond and Qualified Veterans Mortgage Bond
10
HUD USER. 2025 and 2026 Small DDAs and QCTs
11
HUD USER. Qualified Census Tracts and Difficult Development Areas