Tax Credit Apartments for Seniors: Why Rent Can Top 30%

In tax credit apartments for seniors, rent is capped at 30% of the unit's income limit, not 30% of your parent's income, so a parent with less income can pay a bigger share. A Section 8 Housing Choice Voucher can close that gap. Federal tax law requires the building's long-term agreement with the state to bar refusing a tenant because she holds a voucher, and a voucher holder generally pays 30% of adjusted monthly income when the rent is below the local payment standard.1,2

In This Guide

• What Is a Tax Credit Apartment?
• Is Rent in a Tax Credit Apartment Based on Your Income?
• Why a Parent on a Fixed Income Can Pay a Bigger Share
• Tax Credit Rent vs. Public Housing vs. a Voucher
• LIHTC Income Limits for Seniors: What 50% and 60% AMI Mean1
• Using a Section 8 Voucher in a Tax Credit Apartment
• Can a Tax Credit Building Be Seniors-Only?
• How to Find Tax Credit Apartments for Seniors Near You
• What Protects Your Parent After She Moves Into a Tax Credit Apartment?
• Frequently Asked Questions
• Learn More

What Is a Tax Credit Apartment?

You found a building that calls itself "income-restricted," and it looks like the answer for your mom or dad. It may be. It helps to know what kind of program is behind that label first, because it works differently from public housing and Section 8, the programs most families have heard of.

A tax credit apartment is a unit in a building financed through the Low-Income Housing Tax Credit, the federal credit in 26 U.S.C. 42, often shortened to LIHTC. To earn the credit, the owner elects one of three minimum set-aside tests: at least 20% of the units rent-restricted and occupied by people at or below 50% of area median income, at least 40% of the units at or below 60%, or an income-averaging test.1

Two public bodies shape the rules your parent will run into. LIHTC is administered mainly by each state's housing finance agency, and the U.S. Department of Housing and Urban Development (HUD) publishes the Multifamily Tax Subsidy Projects (MTSP) income limits that set qualification levels and maximum rents for tax credit projects.1

If you're still sorting out which kind of help fits, our guide to affordable senior housing covers HUD Section 202 buildings, public housing and Section 8 vouchers. This guide picks up where that one stops: the tax credit building down the street.

Is Rent in a Tax Credit Apartment Based on Your Income?

No, and it's worth understanding why before your parent signs a lease. Under 26 U.S.C. 42, a tax credit unit is rent-restricted if its gross rent doesn't exceed 30% of the imputed income limit that applies to the unit. The cap follows the unit's income limit, not the tenant's own income.1

The "imputed" part is how the law turns an income band into a rent. For the LIHTC rent cap, a tax credit unit's income limit is figured as if 1 person lives in a unit with no separate bedroom, and 1.5 people for each separate bedroom. So the rent cap on a one-bedroom tax credit apartment is pegged to the income limit for a household of 1.5 people, even when your parent lives there alone.1

Two more pieces of the federal gross-rent test matter for a family budget:

• Utilities: gross rent for the LIHTC cap includes a utility allowance, so the cap covers rent and that allowance together.
• Rental assistance: gross rent for the LIHTC cap doesn't include any payment under the Section 8 program or a comparable rental assistance program.1

Why a Parent on a Fixed Income Can Pay a Bigger Share

Many families don't expect this. In HUD's public housing and Section 8 programs, a tenant's payment is figured from her own income, generally 30% of adjusted monthly income. A tax credit unit doesn't work that way. When a tax credit (LIHTC) unit's rent is set at the cap, the further your parent's income falls below the unit's income limit, the bigger the share of her own income the rent takes, and it's more than 30% for anyone below that limit.6,1

It can feel unfair to watch a "low-income" apartment quote a rent that takes a big share of a Social Security check. You're not misreading the lease. It's how the federal rent cap is built, and seeing the arithmetic makes it easier to plan around.

So before your parent falls for a building, ask the management office two questions: which income band the unit is set at, and what the gross rent is, including the utility allowance. Then compare that rent with what she actually receives each month.

Tax Credit Rent vs. Public Housing vs. a Voucher

The affordable senior housing hub compares HUD's programs in full. Here is the narrower question: what is the rent based on?

The voucher column isn't a separate building. It's a subsidy your parent can carry into a private apartment, and that includes a tax credit apartment.2,1

LIHTC Income Limits for Seniors: What 50% and 60% AMI Mean

When a listing says "60% AMI," it's naming the income band for the unit. AMI stands for area median income, and HUD's rental programs set income limits as a percentage of the median income for the county or metropolitan area, adjusted for smaller and larger households. Because the limits differ by area, the same income can fit one county's band and miss the next one's.3

Tax credit buildings use three set-aside tests, and the one the owner picks tells you which bands you'll see:

• The 20-50 test: at least 20% of the units are rent-restricted and occupied by people with income at or below 50% of area median income.
• The 40-60 test: at least 40% of the units are rent-restricted and occupied by people at or below 60% of area median income.
• Income averaging: at least 40% of the units are rent-restricted, each unit carries a designated limit from 20% to 80% of area median income in 10-point steps, and the designations average no more than 60%.1

Under income averaging, a 30% or 40% unit in the same building comes with a lower income limit, and so a lower rent cap, than a 60% unit. That's a reason to ask whether a building has lower-band units before your parent settles on a 60% one.1

The actual dollar limits for your parent's county come from HUD's MTSP tables, which HUD says are used both to determine who qualifies and to set maximum rents for tax credit projects.1

Using a Section 8 Voucher in a Tax Credit Apartment

There is a way to close the gap between a tax credit rent and what your parent can pay. A tax credit apartment and a voucher fit together, and for a parent living on a small fixed income, that combination can be what makes the numbers work.

Can a tax credit building turn away a voucher holder?

If a voucher is what would make the rent affordable for your parent, federal tax law is on your side here. Federal tax law allows the credit for a building only if an extended low-income housing commitment between the owner and the state housing credit agency is in effect. Under 26 U.S.C. 42, that commitment must prohibit refusing to lease to a holder of a Section 8 voucher because the applicant holds one.1

Under Treasury's compliance regulation, 26 CFR 1.42-5, owners of buildings covered by a 1993 federal law must also certify to the state agency at least once a year that the commitment was in effect, including the rule against refusing an applicant because she holds a voucher.1

So your parent doesn't have to hide a voucher or treat it as a strike against her. When you call a tax credit building, say up front that she holds a voucher, or is on a waiting list for one, and ask how voucher holders apply there.

What your parent pays with a voucher

With a Housing Choice Voucher, the local housing agency sets a payment standard based on local rents and unit size. If the rent is below the payment standard, a family generally pays 30% of adjusted monthly income, and the agency pays the difference between the payment standard and the family's portion directly to the landlord.2

If the rent is above the payment standard, the family pays a larger share. When the agency approves a family's first lease in a unit whose gross rent exceeds the payment standard, the family's share can't be more than 40% of adjusted monthly income.2

Does the voucher count against SSI?

If your parent gets SSI, this worry is understandable. The Social Security Administration's instructions exclude the value of federal housing assistance, including public housing and reduced rent provided with HUD or Rural Housing Service involvement, from both SSI income and resources, and they state that "Section 8" housing is HUD housing assistance. So the voucher's help with rent isn't counted as SSI income.8

How to apply for a voucher

You must apply for a Housing Choice Voucher through a local public housing agency, and HUD's Public Housing Agency Directory helps you find the agencies near your parent. About 2,000 local public housing agencies run the Housing Choice Voucher program with HUD funding. To be income-eligible for a Housing Choice Voucher, a household generally must be very low income, which HUD sets at 50% of the area median income.2,3

Because demand is high and waiting lists are long, HUD says you may need to apply to more than one agency's waiting list. Your parent's place on a list depends on how many vouchers are available, when she applied, and any selection preferences. Keep every agency updated on her mailing address, phone number and household size, because failing to do so can get her removed from a waiting list.2

Can a Tax Credit Building Be Seniors-Only?

Many families want a quieter building full of people their parent's age, and that's a fair thing to look for. According to the Congressional Research Service, LIHTC properties may be designated as housing for people who are elderly or have disabilities, and HUD's LIHTC data form asks whether each project targets a specific population, such as families, elderly people, people with disabilities or homeless people.4

The federal test for a building that turns away families with children is in the Fair Housing Act. The Act's familial-status protections don't apply to housing for older persons, which includes:

• Housing intended for, and solely occupied by, people 62 or older.
• Housing intended and operated for people 55 or older in which at least 80% of the occupied units have at least one resident 55 or older, the community publishes and follows policies showing that intent, and it follows HUD's age-verification rules.5

Separately, HUD's rental assistance programs define an "elderly family" as one whose head, co-head, spouse or sole member is at least 62. That definition is about HUD programs, such as a voucher, not about who a tax credit building admits.5

Buildings use these labels differently, so ask each property for its written age policy rather than assuming "senior" means 55 or 62. If your parent wants an age-restricted community with more amenities and the budget can stretch, our guide to independent living walks through the private-pay options.

How to Find Tax Credit Apartments for Seniors Near You

Searching for a building can feel endless. Two places help you narrow it down.

The first is HUD's LIHTC property database, with an online query tool at huduser.gov/lihtc. You can pull every project in a state, narrow the search to a city or county or to a radius around a city's center, and restrict it to projects with particular characteristics. For each project, the database includes the address, the number of units and low-income units, and the number of bedrooms.9

Know its limits before you rely on it. The database covers projects placed in service from 1987 through 2024; HUD says properties placed in service in 2025 will be added in spring 2027, and the database is updated about once a year, so a building that opened recently may not be listed yet. HUD's description of the database doesn't mention vacancies or current rents, so treat it as a list of addresses to call, not a list of openings.9

The second is your parent's state. Because the tax credit program is administered mainly by each state's housing finance agency, it's a natural place to ask about tax credit properties in the area your parent is considering.1

Then call the management office of each building on your list and ask:

• Whether it has openings now, or a waiting list and how long the wait usually runs.
• How to apply: in person, online or on paper, and whether there is an application fee.
• What proof of income and assets it wants with the application, so you can gather your parent's papers before you call back.
• Its age policy.
• The income band of the units it has.
• The gross rent, with the utility allowance.

Also ask whether any of its units carry a project-based voucher. In HUD's project-based voucher program, run by local housing agencies, the family pays a tenant rent figured from its own total tenant payment minus the utility allowance, so the rent follows your parent's income rather than the unit's cap.10,6

What Protects Your Parent After She Moves Into a Tax Credit Apartment?

Once your parent lives there, federal tax law keeps protecting her. The building's extended low-income housing commitment with the state housing credit agency must prohibit evicting an existing tenant of a low-income unit, or ending her tenancy, other than for good cause. It must also prohibit any increase in the unit's gross rent not otherwise permitted under 26 U.S.C. 42, and people who meet the building's income limit, including current tenants, can enforce those rules in any state court.11

For what counts as good cause, look to state law. An IRS audit guide for tax credit compliance, which says it isn't an official statement of the law, says good cause is determined by the state and local law where the property is located. The same guide says an owner isn't obligated to renew a lease and that not renewing isn't, by itself, an eviction without good cause, but the owner must be prepared to show in state court, if challenged, that the nonrenewal isn't a termination of tenancy for other than good cause.11

Those rules last for the building's extended use period, which runs until the later of the date in the state agency's agreement or 15 years after the close of the compliance period. If that period ends early, through foreclosure or because the state agency can't find a buyer to keep the units as low-income housing, the owner still can't evict an existing low-income tenant other than for good cause, or raise the unit's gross rent beyond what section 42 permits, for 3 years.11

So if your parent gets a notice that her lease won't be renewed or her rent is going up sharply, don't take it as final. Ask which rule it's relying on, and get advice under your state's law, since that is where good cause is defined.

Learn More

Find personalized help pricing tax credit apartments and vouchers for your parent at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.