What Is a Tax Credit Apartment? Rent, Eligibility & Protections

A tax credit apartment is a privately owned rental unit where the rent is held below market rate because the building was financed through the federal Low-Income Housing Tax Credit (LIHTC) program. The subsidy is attached to the building, not to you, which makes it different from a Section 8 voucher that follows a tenant. Developers agree to cap rents for at least 30 years in exchange for tax credits that offset their construction costs, and to move in you have to show your household income falls at or below a percentage of the area median income (AMI) set for that unit.¹

The program runs under Section 42 of the Internal Revenue Code. Each state’s housing finance agency awards credits to developers through a competitive process, and in return the developer records a restrictive covenant on the property guaranteeing that a designated share of units stays affordable. The full affordability commitment runs a minimum of 30 years, and many state agencies require longer.²

How Rent Is Set

The maximum rent on a tax credit unit is fixed by a formula in the tax code, not by the landlord. Gross rent cannot exceed 30 percent of the imputed income limitation for that unit.¹ “Imputed” matters here. The formula assumes a household size based on bedrooms rather than who actually lives in the unit: a studio is calculated as one person, and units with bedrooms are calculated at 1.5 people per bedroom.

So a two-bedroom unit designated at 60 percent AMI has its maximum rent based on what a three-person household earning exactly 60 percent of the area median could afford at 30 percent of monthly gross income. Whether your actual paycheck sits at the limit or well below, the rent is the same. This is where LIHTC diverges sharply from programs that scale rent to what a specific tenant earns.

The Utility Allowance

Gross rent under LIHTC includes utilities. If you pay for heat, electricity, or water separately, an estimated utility cost is subtracted from the maximum allowable rent to determine what the landlord can actually charge you.¹ If the maximum gross rent is $1,100 and the utility allowance is $150, the contract rent is capped at $950. Phone, cable, and internet aren’t part of the allowance.

The allowance is an estimate. If your actual bills run higher, you absorb the difference; the landlord has no obligation to cover it. If they run lower, you keep the savings. Ask the leasing office what the current allowance is and check it against realistic usage before signing.

Who Qualifies

Eligibility turns on two things: your income relative to AMI, and whether the unit you’re applying for is one of the ones the developer has designated as income-restricted. Not every unit in a LIHTC building is affordable. The developer picks one of three set-aside tests when the project is placed in service:

20-50 test: at least 20 percent of units reserved for households at or below 50 percent of AMI.
40-60 test: at least 40 percent of units reserved for households at or below 60 percent of AMI.
Average income test: at least 40 percent of units income-restricted, with individual units designated anywhere from 20 to 80 percent of AMI, averaging no more than 60 percent across the designated units.³

The average income test, added in 2018, is what lets a single building mix units at 30 percent AMI with units at 70 or 80 percent AMI. HUD publishes updated AMI figures every year for each metropolitan area and non-metro county, adjusted for household size.⁴ The same $45,000 salary can be over the limit in one city and comfortably under it in another, so eligibility is entirely local.

Citizenship and Social Security Numbers

LIHTC tenants are not required to be United States citizens, and a social security number is not required to qualify. If a household member has one, it’s recorded on the certification paperwork; if not, a placeholder is used. This is one of the clearest differences between LIHTC and federal housing programs that impose citizenship or immigration status requirements.

The Full-Time Student Rule

A household made up entirely of full-time students is generally ineligible. If even one adult in the household isn’t a full-time student, the rule doesn’t apply. When every adult is enrolled full-time, the household can still qualify under one of five statutory exceptions:¹

Every adult is an unmarried parent, no adult is claimed as a dependent by anyone outside the household, and any children are only claimed by a parent.
All adults are married to each other and eligible to file a joint tax return.
At least one member receives assistance under Title IV of the Social Security Act (TANF).
At least one member was previously in state foster care.
At least one member is enrolled in a job training program supported by federal, state, or local workforce laws.

Each exception requires third-party documentation, and property managers verify the claim before certifying the unit.

How to Apply

There is no central government office. You apply directly at the property’s leasing office, and the property manager runs the eligibility determination. Expect a face-to-face interview and independent verification with your employer, bank, and any benefit-issuing agencies.

What to Bring

Plan on four to six consecutive pay stubs, your most recent federal tax return, and prior-year W-2 forms. Self-employed or irregular income is usually verified against the prior 12 months on your tax return. Every recurring income source counts and must be documented: wages, Social Security benefits, child support, pensions, and any other regular payments, backed up with award letters or court orders where applicable.

Management will also review your assets. Checking, savings, investment, and retirement account balances all get disclosed. Assets don’t disqualify you on their own, but if total household assets exceed a threshold, the property must add imputed income to your total, calculated at a HUD-published passbook savings rate. For 2026, the threshold is $52,787 and the passbook rate is 0.40 percent. In most cases the addition is trivial. If you’re sitting right at the eligibility line, it can matter.

Once income and household composition are confirmed, every adult signs a Tenant Income Certification, the legal record of eligibility. Approval can take a few days if third parties respond quickly, or several weeks if they don’t.

Waitlists and Annual Recertification

Demand often exceeds supply, so waitlists are common. Some properties work first-come, first-served; others hold lotteries. Properties may set preferences for local residents, people experiencing homelessness, or households below 30 percent AMI, as long as those preferences comply with fair housing law. Ask how the list moves and whether you need to check in periodically to stay on it.

Once you move in, you complete a recertification each year on the anniversary of your move-in to confirm you still meet program requirements. Properties where 100 percent of units carry LIHTC restrictions may waive annual income recertification, because there is no market-rate unit for a qualified household to displace.

Finding a Tax Credit Apartment

The most comprehensive search tool is the HUD LIHTC Database, run by HUD’s Office of Policy Development and Research. You can search by state, city, and project characteristics. Your state’s housing finance agency also maintains a list of active LIHTC properties, often with more current vacancy information than the federal database. HUD-approved housing counseling agencies offer free help with the search and can walk you through eligibility for specific properties. You can reach a counseling agency through HUD’s website or at 1-888-995-4673.⁵

If Your Income Goes Up After Move-In

A raise or a new job will not get you evicted. Nothing in the LIHTC rules requires an owner to remove a tenant whose income grows above the qualifying limit after move-in. As long as your household income stays at or below 140 percent of the applicable income limit, your unit keeps counting as a low-income unit with no consequences for you or the owner.⁶

If your income crosses 140 percent, the unit becomes an “over-income unit” and the next available unit rule takes effect. The owner must rent the next comparable vacant unit in the same building to a qualifying household. Your unit keeps its low-income status as long as the owner follows this rule. You aren’t forced out, though your rent could rise depending on your lease and any state or local rent protections.⁶

Tenant Protections

Good Cause Eviction

Federal law requires every LIHTC extended use agreement to prohibit eviction or lease termination of a low-income tenant except for good cause. The protection runs through the entire extended use period and continues for three years after it ends.¹ The statute doesn’t define “good cause” federally, so state landlord-tenant law fills in the standard. Nonpayment, lease violations, and criminal activity on the premises generally qualify. An income increase alone does not.

VAWA Protections

LIHTC properties are explicitly covered under the Violence Against Women Act. An owner cannot deny an application, terminate a lease, or evict a tenant because that person is a victim of domestic violence, dating violence, sexual assault, or stalking, and an incident of abuse cannot be treated as a lease violation. Tenants who reasonably believe they face imminent harm have the right to request an emergency transfer. Owners must keep victim status confidential and can bifurcate a lease to remove an abuser without displacing the victim.⁷ Protections apply regardless of gender, and retaliation is prohibited.

Using a Section 8 Voucher at a Tax Credit Apartment

You can use a Housing Choice Voucher to rent a tax credit unit, and the combination can meaningfully lower what you pay. Rental assistance paid through Section 8 does not count toward the LIHTC gross rent calculation, so the property collects the full LIHTC-allowed rent while you pay only the tenant share calculated under the voucher program.¹

Federal law does not require LIHTC owners to accept vouchers. Whether an owner can refuse depends on state and local law.⁸ A growing number of jurisdictions prohibit source-of-income discrimination, which effectively bars owners from turning away applicants solely because they hold a voucher. Check whether your city or state has a source-of-income protection before assuming a specific property has to accept yours.

1
Office of the Law Revision Counsel. 26 USC 42 – Low-Income Housing Credit
2
HUD User. What Happens to Low-Income Housing Tax Credit Properties at Year 15 and Beyond
3
Federal Register. Section 42 Low-Income Housing Credit Average Income Test Regulations
4
HUD Exchange. HOME Income Limits
5
HUD User. LIHTC Database
6
eCFR. 26 CFR 1.42-15 – Available Unit Rule
7
U.S. Department of Justice. Violence Against Women Act Reauthorization Act of 2022 Housing Rights Subpart
8
eCFR. 24 CFR Part 982 – Section 8 Tenant-Based Assistance Housing Choice Voucher Program