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Guide for Completing Form 8823 - page 119 / 197





119 / 197

$12,744.00 ÷ 12 months = $1,062.00 per month*

Note: The bedroom method calculation may be applied only for households moving into units after the date the bedroom election was made. Units with households living in the property before the date of the election will continue to be charged rents based on the number of family members actually living in the unit until such time as a turnover in occupancy occurs.

Tenant Income Rises Above Limit

A unit shall continue to be treated as a low-income unit if the income of the occupants initially met the income limitation and the unit continues to be rent-restricted8. The owner may also be subject to the Available Unit Rule and the Vacant Unit Rule. (See chapters 14 and 15.)

Section 8 Tenants

The gross rent limit applies only to payments made directly by the tenant. Any rental assistance payments made on behalf of the tenant, such as through section 8 of the United States Housing Act of 1937 or any comparable Federal rental assistance, are not included in gross rent. Congress further intended that any comparable state or local government rental assistance not be included in gross rent. See IRC §42(g)(2)(B)(i) and the General Explanation of the Tax Reform Act of 1986.

Example 1: Household Portion of Rent is Below Limit

Example 2: Rent Exceed Limit - Bedroom Election

Assume credits were allocated in 1988 and the owner elected by February 7, 1994 to use the bedroom election to calculate rent. A one-person household moved into a 2-bedroom unit on February 1, 1994 and paid the maximum one-person gross rent of $300 and a $50 utility allowance. Following the bedroom election, the owner raises this household’s rent to the maximum two-bedroom rent of $500, plus a $50 utility allowance, for a total rent of $550.

This is not allowable because the household moved into the unit before the date of the election and the rent of $550 is over the allowable maximum. Rent in this unit may only be changed to the bedroom calculation method on the date a new household moves in. The owner must immediately reduce the rent charge to $300 rent, plus a $50 utility allowance. Date of correction is the date of the lease amendment.

A Section 8 household moved into a unit on January 1, 2000; the maximum LIHC gross rent is $500 and market rate is $600. Household pays $200 and the assistance pays $400; the total rent is $600. There is no noncompliance since the household portion of rent is below the maximum LIHC rent allowed.

The portion of the rent paid by Section 8 tenants can exceed the LIHC rent ceiling as long as the owner receives a Section 8 assistance payment on behalf of the resident. If


IRC § 42(g)(2)(D)(i).


Revised October 2009

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