Understanding Massachusetts Low-Income Housing Tax Credits

By: Sean R. Higgins and Cayla Nyante Brown

Massachusetts offers a key incentive for developers through its Low-Income Housing Tax Credit (State LIHTC), designed to encourage the creation and preservation of affordable housing. The State LIHTC, modeled after the federal program, provides substantial tax benefits to those investing in affordable housing projects across the state.

Administered by the Massachusetts Department of Housing and Community Development, this program targets developers who commit to building or renovating rental housing that serves low-income tenants. In exchange for their investment, developers can receive tax credits that reduce their Massachusetts state tax liability. These credits help offset the costs of construction or rehabilitation, making affordable housing projects more financially viable.

The Massachusetts State LIHTC is available to individuals, partnerships, and corporations that invest in eligible affordable housing projects. Typically, developers claim these credits over a five-year period, with equal installments each year. Any unused credits can be carried forward for up to five years, allowing developers flexibility if their tax liability is lower than expected.

This program works in tandem with the federal Low-Income Housing Tax Credit, which provides additional incentives. By combining these federal and state credits, developers can secure critical financial support, enabling them to provide affordable housing in a market where such units are in high demand. Overall, the Massachusetts Low-Income Housing Tax Credit is a powerful tool that helps increase affordable housing availability while offering financial relief to developers committed to serving low-income communities.