By Stefanie Herring Introduction
The LIHTC (Low-Income Housing Tax Credit) program offers one of the most effective ways for investors to combine financial returns with social impact. By acquiring LIHTC, you can reduce your federal tax liability, diversify your portfolio, and participate in projects that make a real difference in communities. At PURCHASE TAX CREDITS, we connect investors to exclusive LIHTC opportunities that are rarely available on public platforms. This guide will walk you through the process of acquiring LIHTCs and help you navigate the steps with confidence.
Step 1: Understand the Basics of LIHTC
Before diving into an investment, it’s important to understand how the LIHTC program works. Created by Congress in 1986, it provides dollar-for-dollar tax credits to investors who help finance affordable rental housing for low-income households. The credits are claimed over a 10-year period, and compliance with affordability rules is required for at least 15 years.
Key Benefits
- Direct tax savings – Reduces federal tax liability directly.
- Community impact – Supports affordable housing initiatives.
- Stable returns – Government-backed credits ensure predictable benefits.
Step 2: Find Quality LIHTC Opportunities
Not all LIHTC investments are the same. The most desirable opportunities are often reserved for insiders and never reach the public market. This is where PURCHASE TAX CREDITS plays a vital role, giving investors access to premium LIHTC deals with strong returns and reliable developers.
Sources of Opportunities
- Specialized tax credit brokerage firms.
- Developers with proven LIHTC track records.
- Exclusive investment networks.
Step 3: Perform Due Diligence
Once you identify a potential LIHTC investment, thorough due diligence is essential. This includes reviewing the project’s location, financial forecasts, compliance plan, and the developer’s experience with affordable housing projects.
What to Review
- Developer’s history of delivering LIHTC projects.
- Market demand for affordable housing in the area.
- Financial stability and projected returns.
Step 4: Structure the Investment
Most LIHTC investments are structured as limited partnerships or LLCs. As an investor, you provide equity to the project in exchange for a share of the tax credits and, in some cases, cash flow from operations.
Common Structures
- Direct investment – Buying into a project directly.
- Fund participation – Joining a pooled fund of multiple LIHTC projects.
Step 5: Monitor Compliance
Maintaining eligibility for the tax credits requires strict adherence to program rules. This includes ensuring tenants meet income requirements and rents stay within prescribed limits.
Compliance Timeline
- Years 1–10 – Tax credits are claimed annually.
- Years 11–15 – Affordability requirements remain in place without additional credits.
Step 6: Plan for Exit
After the compliance period ends, investors often have opportunities to sell, refinance, or reposition the property. This can result in additional profits beyond the tax credit benefits.
Exit Options
- Sell to another investor.
- Refinance to unlock equity.
- Convert to market-rate housing where permitted.
Advantages of Working with PURCHASE TAX CREDITS
By partnering with PURCHASE TAX CREDITS, you gain insider access to exclusive LIHTC deals, professional due diligence support, and guidance throughout the compliance period. Our network ensures that you see only high-quality, vetted opportunities.
Conclusion
Acquiring LIHTCs is a strategic move for investors who want to blend strong financial returns with meaningful community impact. By following the right steps—understanding the program, finding quality opportunities, conducting due diligence, structuring the investment properly, and ensuring compliance—you can confidently build LIHTC investments into your portfolio. With PURCHASE TAX CREDITS as your trusted partner, you can access exclusive opportunities and maximize both your financial gains and your positive social contribution.