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Guide for Completing Form 8823 - page 118 / 197

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7

IRC §42(g)(2)(C)

number of people in the household for the area in which the property is located. Under this method, the maximum allowable rent varies with the number of individuals occupying the unit. This is the method used prior to the Revenue Reconciliation Act of 1989.

Post-1989: For properties receiving tax credit allocations or placing bond-financed buildings in service after December 31, 19897 and for pre-1990 properties subject to the bedroom election under Rev. Proc. 94-9, maximum gross rents are computed based on the number of bedrooms in the unit. Units with no separate bedroom are treated as being occupied by one person and units with separate bedrooms are treated as being occupied by 1.5 persons per each separate bedroom.

*Example 1: Computation of Maximum Allowable Gross Monthly Rent

1 PERSON

2 PERSON

3 PERSON

4 PERSON

5 PERSON

30% OF MEDIAN

16550

18900

21250

23600

25500

VERY LOW INCOME

27550

31500

35400

39350

42500

LOW-INCOME

43050

49200

55350

61500

66400

The owner of an LIHC building with 1 and 2-bedroom units elects the 40-60 minimum set-aside. For 2009, HUD provides the following information:

For a 1-bedroom unit, the unit is treated as occupied by 1.5 persons. The income limit is computed by averaging the “very low income” income for a 1-person household and a two-person household. (Note: Averaging is necessary whenever the number of persons deemed to occupy the unit is not a whole number.) The result is then multiplied by 1.2 to compute 60% of AMGI.

[($27,550 + $31,500) ÷ 2] x 1.2 = $35,430.00

The maximum allowable annual rent is computed by multiplying the income limit for 1.5 persons by 30 percent.

$31,430 x .30 = $10,629.00

The maximum allowable monthly rent is computed by dividing the maximum allowable annual rent by 12 months.

$10,629 ÷ 12 months = $885.75 per month

For a 2-bedroom unit, the unit is treated as occupied by 3 persons. The maximum annual rent is computed as:

$35,400 x 1.2 x .30 = $12,744.00

The maximum monthly rent is computed as:

11-4

Revised October 2009

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