Congressional Spending Bill Fails to Preserve Low-Income Tax Credits

By Emily Gallagher

Earlier this month I wrote a deep-dive into the gradual fade-out of the bonus depreciation deduction. Starting January 1st of 2023, real estate professionals can only write off 80 percent’s worth of depreciation for a qualifying property. In 2024, that deduction only extends to 60 percent. The deduction’s value will continue to go down 20 percent each year until it finally fades into oblivion in 2027, unless Congress decides to intervene at some point.

Now, just before taking their holiday break, Congress passed a last-minute $1.7 billion spending bill and, while it had provisions expanding the Department of Housing and Urban Development (HUD), it did not extend the longstanding federal tax credit for qualifying low-income developments. These tax breaks are often added to others at the state level in order to help make low-income developments financially feasible. Emily Cadik, CEO of the Affordable Housing Tax Credit Coalition said, “Without extending the 12.5 percent housing credit allocation increase that expired at the end of 2021, Congress is extending a cut to affordable housing production at a time when the need is skyrocketing.”

As the nation faces a staggering affordable housing shortage the property industry will need to find ways to develop affordable housing without the help of federal tax credits. Hopefully, some of the new HUD funding will go to more programs to help affordable housing developers build more of these important assets.

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