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Guide for Completing Form 8823 - page 123 / 197





123 / 197

HUD releases new income limits for 2007 on March 20, 2007. The new imputed income limit for two bedroom units is $31,500. The maximum rent the owner can charge is $9,450.00 annually or $787.50 monthly. The owner correctly adjusts the rents beginning May 1, 2007.*

Out of Compliance

A unit is out of compliance *if the rent exceeds the limit on a tax year basis or on a monthly basis. A unit is also considered out of compliance if an owner charges impermissible fees.

Example 1: Rent Exceeds Limit on a Monthly Basis

The maximum rent for a two-bedroom unit is $800 per month. The owner charges $795. In addition to rent, the owner charges a one-time $35 hookup fee for the tenant’s washer and dryer the month a tenant moves in. A new tenant moves in on June 1, 2007 and pays $830 for rent the first month. For July through December, the tenant pays $795.

The one-time hookup fee is included in rent for one month. The rent of $830 for June exceeded the monthly limit.

Example 2: Failure to Remit Rent in Excess of LIHC Limit (Rural Housing)

A property with Rural Development assistance received an allocation of credit in 2001. The maximum gross LIHC rent for a one-bedroom unit is $600. A household moves into a one-bedroom unit on July 1, 2007 and pays $675 rent each month based on the household’s calculated rent under Rural Development regulations. However, the owner fails to remit the rent in excess of the LIHC limit ($75) to Rural Development.

The owner is out of compliance every month beginning July 1, 2007 when the household moved in.

Example 3: Owner Charges Impermissible Fee

The owner charges new tenants a one-time optional fee of $125 to clean a unit before move-in; i.e., the new tenant may move into the unit as the previous tenant left it (which is not suitable for occupancy) or pay the fee to the owner to clean and prepare the unit for occupancy. A new tenant paid the $125 cleaning fee and moved into the unit on March 15, 2008.

It is not permissible for owners to charge tenants a fee for maintaining low- income units in a condition suitable for occupancy under IRC §42(i)(3). Under Treas. Reg. §1.42-5(g), compliance with the requirements of IRC §42 is the responsibility of the owner of the building for which the credit is allowable. The unit is out of compliance as of March 15, 2008.


Revised October 2009

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