IRS published Rev. Rul. 2020-4<\/a>. This revenue ruling provided long-awaited guidance on how to compute the new income limits (20%, 30%, 40%, 70%, and 80%) under the average income minimum set-aside election. The addition of the new Average Income Set-Aside in 2018 was exciting news for our industry as it enables LIHTC housing providers to provide affordable housing to a previously underserved population of households —\u00a0those earning up to 80% AMI who still desperately needed affordable housing. One challenge faced by owners who made this election and Housing Finance Agencies who are monitoring compliance with this set-aside is how to determine the new income limits under the set-aside. The lack of guidance on this topic made many owners leery of making this new election.<\/p>\nThankfully, Rev. Rul. 2020-04 provides clear guidance on how to calculate income and rent\u00a0limits. Prior to the creation of the average income set-aside in 2018, only two federal income limits were applicable to the LIHTC program; 50% and 60% of area median income. Rev. Rul. 89-24, published in 1989, provided guidance that the calculation of the 60% limit would be determined using HUD’s very-low (50%) limit and multiplying it by a conversion factor of 1.2, which represents 120% of the HUD very-low (50%) limit for the same family size.<\/p>\n
Calculating New Income Limitations with the Average\u00a0Income Test<\/h3>\n
Consistent with Rev. Rul 89-24, Rev. Rul. 2020-04, provides that the new income limits should be calculated based on the HUD very-low (50%) income limit for the same family size. For the\u00a0average income test<\/strong><\/em>, the income limitations must be calculated as follows:<\/p>\n\n- 20% limit: 40% of the income limit for a very low-income family of the same size.<\/li>\n
- 30% limit: 60% of the income limit for a very low-income family of the same size.<\/li>\n
- 40% limit: 80% of the income limit for a very low-income family of the same size.<\/li>\n
- 50% limit: equal to the income limit for a very low-income family of the same size.<\/li>\n
- 60% limit: 120% of the income limit for a very low-income family of the same size.<\/li>\n
- 70% limit: 140% of the income limit for a very low-income family of the same size.<\/li>\n
- 80% limit: 160% of the income limit for a very low-income family of the same size.<\/li>\n<\/ul>\n
The new limits can be determined by multiplying HUD’s published very-low (50%) income limit by the applicable conversion factor. HUD’s very-low (50%) income limit for a 1-person household in\u00a0Denver County,\u00a0Colorado is $32,500.<\/p>\n
\n- 20% limit for a 1-person household = $13,000($32,500 x .04)<\/li>\n
- 30% limit for a 1-person household = $19,500($32,500 x .06)<\/li>\n
- 40% limit for a 1-person household = $26,000($32,500 x .08)<\/li>\n
- 70% limit for a 1-person household = $45,500($32,500 x .1.4)<\/li>\n
- 80% limit for a 1-person household = $52,000($32,500 x .1.6)<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"
IRS Provides Long-Awaited Guidance on Determining Income Limits under the Average Income Test On January 30, 2020, the\u00a0IRS published Rev. Rul. 2020-4. This revenue ruling provided long-awaited guidance on how…<\/p>\n","protected":false},"author":5,"featured_media":1234,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"inline_featured_image":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"_price":"","_stock":"","_tribe_ticket_header":"","_tribe_default_ticket_provider":"","_tribe_ticket_capacity":"0","_ticket_start_date":"","_ticket_end_date":"","_tribe_ticket_show_description":"","_tribe_ticket_show_not_going":false,"_tribe_ticket_use_global_stock":"","_tribe_ticket_global_stock_level":"","_global_stock_mode":"","_global_stock_cap":"","_tribe_rsvp_for_event":"","_tribe_ticket_going_count":"","_tribe_ticket_not_going_count":"","_tribe_tickets_list":"[]","_tribe_ticket_has_attendee_info_fields":false,"footnotes":""},"categories":[31],"tags":[134,19,32],"yoast_head":"\n
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