8609 Instructions for Form 8609

Instructions for Form 8609

Department of the Treasury
Internal Revenue Service

(Rev. July 2018)

Low-Income Housing Credit Allocation and Certification
Section references are to the Internal Revenue Code unless
otherwise noted.

Future Developments

For the latest information about developments related to
Form 8609 and its instructions, such as legislation enacted
after they were published, go to IRS.gov/Form8609.

What’s New
Average income test. An average income election has
been added to the section 42(g)(1) minimum set-aside
requirements by the Consolidated Appropriations Act of 2018
(P.L. 115-141). See Line 10c and Line 10d, later, for details.

Reminder

The 9% minimum applicable percentage of section 42(b)(2)
has been made permanent for certain buildings placed in
service after July 30, 2008. For details, see the instructions
for Part I.

General Instructions
Purpose of Form

Owners of residential low-income rental buildings are
allowed a low-income housing credit for each qualified
building over a 10-year credit period. Form 8609 can be used
to obtain a housing credit allocation from the housing credit
agency. A separate Form 8609 must be issued for each
building in a multiple building project. Form 8609 is also used
to certify certain information.

Housing credit agency. This is any state or local agency
authorized to make low-income housing credit allocations
within its jurisdiction.
Building identification number (BIN). This number is
assigned by the housing credit agency. The BIN initially
assigned to a building must be used for any allocation of
credit to the building that requires a separate Form 8609 (see
Multiple Forms 8609, later). For example, rehabilitation
expenditures treated as a separate new building shouldn't
have a separate BIN if the building already has one. Use the
number first assigned to the building.
Allocation of credit. For an owner to claim a low-income
housing credit on a building (except as explained under
Tax-exempt bonds, later), the housing credit agency must
make an allocation of the credit by the close of the calendar
year in which the building is placed in service, unless:
1. The allocation is the result of an advance binding
commitment by the housing credit agency made not later
than the close of the calendar year in which the building is
placed in service (see section 42(h)(1)(C));
2. The allocation relates to an increase in qualified basis
(see section 42(h)(1)(D));
3. The allocation is made for a building placed in service
no later than the second calendar year following the calendar
year in which the allocation is made if the building is part of a
Jul 27, 2018

project in which the taxpayer's basis is more than 10% of the
project's reasonably expected basis as of the end of that
second calendar year; or
4. The allocation is made for a project that includes more
than one building if:
a. The allocation is made during the project period,
b. The allocation applies only to buildings placed in
service during or after the calendar year in which the
allocation is made, and
c. Each building in the project to which the allocation
applies is identified by a separate building identification
number (BIN).
Regarding (3) and (4) (carryover allocations) see sections
42(h)(1)(E) and 42(h)(1)(F) and Regulations section 1.42-6.
The agency can only make an allocation to a building
located within its geographical jurisdiction. Once an
allocation is made, the credit is allowable for all years during
the 10-year credit period. A separate Form 8609 must be
completed for each building to which an allocation of credit is
made.
Multiple Forms 8609. Allocations of credit in separate
calendar years require separate Forms 8609. Also, when a
building receives separate allocations for acquisition of an
existing building and for rehabilitation expenditures, a
separate Form 8609 must be completed for each credit
allocation.
Tax-exempt bonds. No housing credit allocation is required
for any portion of the eligible basis of a qualified low-income
building that is financed with tax-exempt bonds taken into
account for purposes of the volume cap under section 146 if
principal payments on the financing are applied within a
reasonable period to redeem obligations the proceeds of
which were used to provide the financing, or the financing is
refunded as described in section 146(i)(6). An allocation isn't
needed when 50% or more of the aggregate basis of the
building and the land on which the building is located
( defined below) is financed with tax-exempt bonds
described in the preceding sentence. However, the owner
must still get a Form 8609 from the appropriate housing
credit agency (with the applicable items completed, including
an assigned BIN).
Land on which the building is located. This includes
only land that is functionally related and subordinate to the
qualified low-income building. (See Regulations sections
1.103-8(a)(3) and 1.103-8(b)(4)(iii) for the meaning of
“functionally related and subordinate.”)

Filing Requirement
Housing credit agency. Complete and sign Part I of Form
8609 and make copies of the form. Submit a copy with Form
8610, Annual Low-Income Housing Credit Agencies Report,
and keep a copy for the records. The agency must send the
original, signed Form 8609 (including instructions) to the
building owner.

Cat. No. 52385A

Line 1a. Generally, where Form 8609 is the allocating
document, the date of the allocation is the date the Form
8609 is completed, signed, and dated by an authorized
official of the housing credit agency during the year the
building is placed in service and mailed to the owner of the
qualified low-income building.
However, if an allocation is made under section 42(h)(1)
(E) or 42(h)(1)(F), the date of allocation is the date the
authorized official of the housing credit agency completes,
signs, and dates the section 42(h)(1)(E) or 42(h)(1)(F)
document used to make the allocation. If no allocation is
required (i.e., 50% or greater tax-exempt bond financed
building), leave line 1a blank.

Building owner. You must make a one-time submission of
Form 8609 to the Low-Income Housing Credit (LIHC) Unit at
the IRS Philadelphia campus address below. After making a
copy of the completed original Form 8609, file the original of
the form with the unit no later than the due date (including
extensions) of your first tax return with which you are filing
Form 8609-A, Annual Statement for Low-Income Housing
Credit.
Where to file Form 8609. Send the properly completed
and signed form(s) to:
Department of the Treasury
Internal Revenue Service Center
Philadelphia, PA 19255-0549

Line 1b. Enter the housing credit dollar amount allocated to
the building for each year of the 10-year credit period. The
amount should equal the percentage on line 2 multiplied by
the amount on line 3a. The housing credit agency is required
to allocate only the amount necessary to assure project
feasibility. To accomplish this, the agency can, to the extent
permitted by the Code and regulations, lower the percentage
on line 2 and the amount on line 3a. See the instructions for
these lines for the limits that apply. For tax-exempt bond
projects for which no allocation is required, enter the housing
credit dollar amount allowable under section 42(h)(4).

Note. The housing credit agency may require you to submit
a copy of Form 8609 with a completed Part II to the agency.
You should contact the agency to obtain agency filing
requirements.
Also, file Form 8609-A for each year of the 15-year
compliance period. The credit is claimed on Form 8586,
Low-Income Housing Credit. See the forms for filing
instructions.

Building Owner's Recordkeeping

Line 2. The maximum applicable credit percentage
allowable is determined in part by the date the building was
placed in service. Follow the instructions pertaining to the
date the building was placed in service.
Enter the maximum applicable credit percentage
allowable to the building for the month the building was
placed in service or, if applicable, for the month determined
under section 42(b)(1)(A)(ii). This percentage may be less
than the applicable percentage published by the IRS monthly
in the Internal Revenue Bulletin.

Keep the following items in your records for three years after
the due date (including extensions) of the owner's tax return
for the tax year that includes the end of the 15-year
compliance period.
A copy of the original Form 8609 received from the
housing agency and all related Forms 8609-A (or
predecessor Schedules A (Form 8609)), Forms 8586, and
any Forms 8611, Recapture of Low-Income Housing Credit.
If the maximum applicable credit percentage allowable on
line 2 reflects an election under section 42(b)(1)(A)(ii), (or
former section 42(b)(2)(A)(ii), for buildings placed in service
before July 31, 2008), a copy of the election statement.
If the binding agreement specifying the housing credit
dollar amount is contained in a separate document, a copy of
the binding agreement.
If the housing credit dollar amount allocated on line 1b
reflects an allocation made under section 42(h)(1)(E) or
section 42(h)(1)(F), a copy of the allocation document.

A minimum applicable credit percentage of 9% is in
effect for new non-federally subsidized buildings
CAUTION placed in service after July 30, 2008. The 9%
minimum applies to new non-federally subsidized buildings
even if the taxpayer made an irrevocable election under
former section 42(b)(1)(A)(ii). If this circumstance applies,
don't enter less than 9% on line 2. See section 42(b)(2).

!

If an election was made under section 42(b)(1)(A)(ii) to
use the applicable percentage for a month other than the
month in which a building is placed in service, the
requirements of Regulations section 1.42-8 must be met. The
agency must keep a copy of the binding agreement. The
applicable percentage is published monthly in the Internal
Revenue Bulletin. For new buildings that aren't federally
subsidized under section 42(i)(2)(A), use the applicable
percentage for the 70% present value credit, but don't enter
less than 9%, unless the housing credit agency determines
that a lesser amount is necessary to assure project feasibility.
For new buildings that are federally subsidized, or existing
buildings, use the applicable percentage for the 30% present
value credit. See the instructions for line 6 for the definition of
“federally subsidized,” and the time period for which the
definition applies. A taxpayer may elect under section 42(i)(2)
(B) to reduce eligible basis by the proceeds of any
tax-exempt obligation in order to obtain the higher credit
percentage.
For allocations to buildings for additions to qualified basis
under section 42(f)(3), don't reduce the applicable
percentage even though the building owner may only claim a

Specific Instructions
Part I—Allocation of Credit
Completed by Housing Credit Agency Only
Addition to qualified basis. Check this box if an allocation
relates to an increase in qualified basis under section 42(f)
(3). Enter only the housing credit dollar amount for the
increase. Don't include any portion of the original qualified
basis when determining this amount.
Amended form. Check this box if this form amends a
previously issued form. Complete all entries and explain the
reason for the amended form. For example, if there is a
change in the amount of initial allocation before the close of
the calendar year, file an amended Form 8609 instead of the
original form.
Item A. Identify the building for which this Form 8609 is
issued when there are multiple buildings with the same
address (e.g., BLDG. 6 of 8).
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Instructions for Form 8609 (7-2018)

credit based on two-thirds of the credit percentage allocated
to the building.

financed by certain tax-exempt bonds. If this amount is zero,
enter -0-. Don't leave this line blank.

Line 3a. Enter the maximum qualified basis of the building.
In computing qualified basis, the housing credit agency
should use only the amount of eligible basis necessary to
result in a qualified basis which, when multiplied by the
percentage on line 2, equals the credit amount on line 1b.
However, the housing credit agency isn't required to reduce
maximum qualified basis and can lower the maximum
applicable percentage on line 2. To compute qualified basis,
multiply the eligible basis of the qualified low-income building
by the smaller of:
The fractional number of low-income units to all residential
rental units in the building (the “unit fraction”) or
The fractional amount of floor space of the low-income
units to the floor space of all residential rental units in the
building (the “floor space fraction”).
Generally, the term "low-income unit" means any unit in a
building if the unit is rent-restricted and the individuals
occupying the unit meet the income limitation applicable to
the project of which the building is a part. See section 42(i)(3)
(A). Generally, a unit isn't treated as a low-income unit unless
it's suitable for occupancy and used other than on a transient
basis. Section 42(i)(3)(B) provides for certain exceptions
(e.g., units that provide for transitional housing for the
homeless may qualify as low-income units). See sections
42(i)(3) and 42(c)(1)(E) for more information.
Except as explained in the instructions for line 3b below,
the eligible basis for a new building is its adjusted basis as of
the close of the first tax year of the credit period. For certain
existing buildings, the eligible basis is its acquisition cost plus
capital improvements through the close of the first tax year of
the credit period. See the instructions for line 3b and section
42(d) for other exceptions and details.

Line 5. The placed-in-service date for a residential rental
building is the date the first unit in the building is ready and
available for occupancy under state or local law.
Rehabilitation expenditures treated as a separate new
building under section 42(e) are placed in service at the
close of any 24-month period over which the expenditures
are aggregated, whether or not the building is occupied
during the rehabilitation period.
Note. The placed-in-service date for an existing building is
determined separately from the placed-in-service date of
rehabilitation expenditures treated as a separate new
building.
Line 6. Not more than 90% of the state housing credit ceiling
for any calendar year can be allocated to projects other than
projects involving qualified nonprofit organizations. A project
involves a qualified nonprofit organization if that qualified
nonprofit organization owns an interest in the project (directly
or through a partnership) and materially participate (within
the meaning of section 469(h)) in the development and
operation of the project throughout the compliance period.
See section 42(h)(5) for more details.
Generally, no credit is allowable for acquisition of an
existing building unless substantial rehabilitation is done. See
sections 42(d)(2)(B)(iv) and 42(f)(5) that were in effect on the
date the allocation was made. Don't issue Form 8609 for
acquisition of an existing building unless substantial
rehabilitation under section 42(e) is placed in service.
Lines 6a and 6d. A building is treated as federally
subsidized if at any time during the tax year or prior tax year
there is outstanding any tax-exempt bond financing, the
proceeds of which are used (directly or indirectly) for the
building or its operation. If a building is federally subsidized,
then box 6a or 6d must be checked regardless of whether the
taxpayer has informed the housing credit agency that the
taxpayer intends to make the election under section 42(i)(2)
(B) to reduce eligible basis by the proceeds of any
tax-exempt obligation.

Line 3b. Special rule to increase basis for buildings in
certain high-cost areas. If the building is located in a
high-cost area (i.e., “qualified census tract” or “difficult
development area”), the eligible basis may be increased as
follows.
For new buildings, the eligible basis may be up to 130% of
such basis determined without this provision.
For existing buildings, the rehabilitation expenditures
under section 42(e) may be up to 130% of the expenditures
determined without regard to this provision.
Enter the percentage to which eligible basis was
increased. For example, if the eligible basis was increased to
120%, enter “120.”
Section 42(d)(5)(B)(v) permits a similar increase in basis
for any non-federally subsidized building designated by the
state agency to need the basis increase to be financially
feasible as part of a qualified low-income housing project.

Part II—First-Year Certification
Completed by Building Owner With Respect to
the First Year of the Credit Period
By completing Part II, you are certifying the date the
building is placed in service corresponds to the date
CAUTION on line 5. If the Form 8609 issued to you contains the
wrong date or no date, obtain a new or amended Form 8609
from the housing credit agency.

!

Line 7. Enter the eligible basis (in dollars) of the building.
Eligible basis doesn't include the cost of land. Determine
eligible basis at the close of the first year of the credit period
(see sections 42(f)(1), 42(f)(5), and 42(g)(3)(B)(iii) for
determining the start of the credit period).
For new buildings, the eligible basis is generally the cost
of construction or rehabilitation expenditures incurred under
section 42(e).
For existing buildings, the eligible basis is the cost of
acquisition plus rehabilitation expenditures not treated as a
separate new building under section 42(e) incurred by the
close of the first year of the credit period.

See section 42(d)(5)(B) for definitions of a qualified
TIP census tract and a difficult development area, and for
other details.
Note. Before increasing eligible basis, the eligible basis
must be reduced by any federal subsidy which the taxpayer
elects to exclude from eligible basis. For buildings placed in
service after July 30, 2008, the eligible basis can't include
any costs financed with federal grant proceeds.
Line 4. Enter the percentage of the aggregate basis of the
building and land on which the building is located that is

Instructions for Form 8609 (7-2018)

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Are financed under a common plan of financing; and
Have similarly constructed housing units.
A qualified low-income building includes residential rental
property that is an apartment building, a single-family
dwelling, a town house, a row house, a duplex, or a
condominium.

If the housing credit agency has entered an increased
percentage in Part I, line 3b, multiply the eligible basis by the
increased percentage and enter the result.
Residential rental property may qualify for the credit even
though part of the building in which the residential rental units
are located is used for commercial use. Don't include the
cost of the nonresident rental property. However, you may
generally include the basis of common areas or tenant
facilities, such as swimming pools or parking areas, provided
there is no separate fee for the use of these facilities and they
are made available on a comparable basis to all tenants in
the project.
The eligible basis shall not include any costs paid by the
proceeds of a federal grant. Also, reduce the eligible basis by
the entire basis allocable to non-low-income units that are
above average quality standard of the low-income units in the
building. You may, however, include a portion of the basis of
these non-low-income units if the cost of any of these units
doesn't exceed by more than 15% the average cost of all
low-income units in the building, and you elect to exclude this
excess cost from the eligible basis by checking the “Yes” box
on line 9b. See section 42(d)(3).
You may elect to reduce the eligible basis by the proceeds
of any tax-exempt obligation to obtain a higher credit
percentage. To make this election, check the “Yes” box in
Part II, line 9a. Reduce the eligible basis by the obligation
proceeds before entering the amount on line 7. You must
reduce the eligible basis by such obligation proceeds before
multiplying the eligible basis by the increased percentage in
Part I, line 3b.

Line 9a. Follow the instructions that apply for the date the
building was placed in service.
You may elect to reduce the eligible basis by the proceeds
of any tax-exempt obligation and claim the 70% present
value credit on the remaining eligible basis. A minimum
applicable percentage of 9% is in effect for new non-federally
subsidized buildings placed in service after July 30, 2008,
unless the housing credit agency determines a lesser amount
is necessary to assure project feasibility. However, if you
make this election, you may not claim the 30% present value
credit on the portion of the basis that was financed with the
tax-exempt obligation.
Line 9b. See the instructions for Part II, line 7.
Line 10a. You may elect to begin the credit period in the tax
year after the building is placed in service. Once made, the
election is irrevocable.
Note. Section 42(g)(3)(B)(iii) provides special rules for
determining the start of the credit period for certain multiple
building projects.
Line 10b. Partnerships with 35 or more partners are treated
as the taxpayer for purposes of recapture unless an election
is made not to treat the partnership as the taxpayer. Check
the “Yes” box if you don't want the partnership to be treated
as the taxpayer for purposes of recapture. Once made, the
election is irrevocable.

Line 8a. Multiply the eligible basis of the building shown on
line 7 by the smaller of the unit fraction or the floor space
fraction as of the close of the first year of the credit period
and enter the result on line 8a. Low-income units are units
occupied by qualifying tenants, while residential rental units
are all units, whether or not occupied. See the instructions for
Part I, line 3a.

Line 10c. You must meet the minimum set-aside
requirements under section 42(g)(1) for the project by
electing one of the following tests. Once made, the election is
irrevocable.
20-50 Test. Twenty percent (20%) or more of the
residential units in the project must be both rent restricted
and occupied by individuals whose income is 50% or less of
the area median gross income.
40-60 Test. Forty percent (40%) or more of the residential
units in the project must be both rent restricted and occupied
by individuals whose income is 60% or less of the area
median gross income.
Average Income Test. Forty percent (40%) or more (25%
or more in the case of a project described in section 142(d)
(6)) of the residential units in the project must be both rent
restricted and occupied by individuals whose income does
not exceed the imputed income limitation designated by the
taxpayer with respect to the respective unit. The average of
the imputed income limitations designated must not be more
than 60% of the area median gross income. The designated
imputed income limitation of a unit can only be 20%, 30%,
40%, 50%, 60%, 70%, or 80% of the area median gross
income.

Line 8b. Each building is considered a separate project
under section 42(g)(3)(D) unless, before the close of the first
calendar year in the project period (defined in section 42(h)
(1)(F)(ii)), each building that is (or will be) part of a multiple
building project is identified by attaching the statement
described below.
The statement must be attached to this Form 8609 and
include:
The name and address of the project and each building in
the project,
The BIN of each building in the project,
The aggregate credit dollar amount for the project, and
The credit allocated to each building in the project.
Notwithstanding a checked “Yes” box on line 8b,
failure to attach a statement providing the above
CAUTION required information will result in each building being
considered a separate project under section 42(g)(3)(D). The
minimum set-aside requirement (see the instructions for
line 10c) is a project-based test.

!

Two or more qualified low-income buildings may be
included in a multiple building project only if they:
Are located on the same tract of land (including contiguous
parcels), unless all of the dwelling units in all of the buildings
being aggregated in the multiple building project are rent
restricted units (see section 42(g)(7));
Are owned by the same person for federal tax purposes;

!

The average income test is only available for
elections made after March 23, 2018.

CAUTION

Note. Owners of buildings in projects located in New York
City may not use the 40-60 Test. Instead, they may use the
25-60 Test. Under the 25-60 Test, 25% or more of the
residential units in the project must be both rent restricted
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Instructions for Form 8609 (7-2018)

and occupied by individuals whose income is 60% or less of
the area median gross income (see section 142(d)(6)).
Rural projects. For purposes of the 20-50, 40-60,
average income, and 25-60 tests, “national non-metropolitan
median income” will be used for determining income if it
exceeds “area median gross income,” but only for
determinations of income made after July 30, 2008, and
buildings with an allocation of credit. See section 42(i)(8) for
details.

Privacy Act and Paperwork Reduction Act Notice. We
ask for the information on this form to carry out the Internal
Revenue laws of the United States. Claiming this credit is
voluntary; however, if you do claim the credit, sections 42,
6001, and 6011 require you to provide this information.
Section 6109 requires you to provide your taxpayer
identifying number (SSN, EIN, or ITIN). We need this
information to ensure that you are complying with the
revenue laws and to allow us to figure and collect the right
amount of tax. We may disclose this information to the
Department of Justice for civil or criminal litigation, and to
cities, states, the District of Columbia, and U.S.
commonwealths and possessions for use in administering
their tax laws. We may also disclose this information to other
countries under a tax treaty, to federal and state agencies to
enforce federal nontax criminal laws, or to federal law
enforcement and intelligence agencies to combat terrorism.
Failure to provide this information may delay or prevent
processing your claim. Providing false information may
subject you to penalties.

The minimum set-aside requirement is a
project-based test and must be met by the close of
CAUTION the first year of the credit period in order to claim any
credit for the first year or for any subsequent years.

!

Line 10d. The deep rent skewed 15-40 election isn't an
additional test for satisfying the minimum set-aside
requirements of section 42(g)(1). The 15-40 test is an
election that relates to the determination of a low-income
tenant's income. Generally, a continuing resident's income
may increase up to 140% of the applicable income limit.
If the 20-50, 40-60, or 25-60 test under the minimum
set-aside rules described, earlier, in Line 10c has been
elected, the applicable income limit generally is 50% or less
or 60% or less of the area median gross income (or, when
applicable, national non-metropolitan median income).
If the average income test in Line 10c has been elected,
the applicable income limit generally is the imputed income
limitation designated by the taxpayer with respect to the
respective unit. The average of the imputed income
limitations designated must not exceed 60% of the area
median gross income (or, when applicable, national
non-metropolitan median income). Also, the designated
imputed income limitation of any unit must be in 10%
increments between the range of 20% and 80% of the area
median gross income (or, when applicable, national
non-metropolitan median income).
When the deep rent skewed election is made, the income
of a continuing resident may increase up to 170% of the
applicable income limit. If the deep rent skewed election is
made, at least 15% of all low-income units in the project must
be occupied at all times during the compliance period by
tenants whose income is 40% or less of the area median
gross income (or when applicable, national non-metropolitan
median income). A deep rent skewed project itself must meet
the requirements of section 142(d)(4)(B). Once made, the
election is irrevocable.

Instructions for Form 8609 (7-2018)

You are not required to provide the information requested
on a form that is subject to the Paperwork Reduction Act
unless the form displays a valid OMB control number. Books
or records relating to a form or its instructions must be
retained as long as their contents may become material in
the administration of any Internal Revenue law.
The time needed to complete and file the form will vary
depending on individual circumstances. The estimated
average time is:
Learning about the law or the form . . . . . . . .
Recordkeeping . . . . . . . . . . . . . . . . . . . .
Preparing and sending the form to the IRS . . .

4 hr., 10 min.
10 hr., 45 min.
4 hr., 31 min.

If you have comments concerning the accuracy of these
time estimates or suggestions for making these forms
simpler, we would be happy to hear from you. You can send
your comments from IRS.gov/FormsPubs. Click on “Help
with Forms and Instructions” and then on “Give us feedback.”
Or you can send your comments to the Internal Revenue
Service, Tax Forms and Publications, 1111 Constitution Ave.
NW, IR-6526, Washington, DC, 20224. Do not send the tax
form to this office. Instead, see Filing Requirement, earlier.

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