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Guide for Completing Form 8823 - page 37 / 197





37 / 197

*Example 3: Remaining Tenants Must be Income Qualified

Michael, an income-qualified individual, moved into a two bedroom LIHC unit in a mixed-used project on May 20, 2006. Jason joined the household in October of 2007. At that time, Michael and Jason’s combined income was below the limit for a two person household. In January of 2008, Michael moved out. It is not necessary for Jason to be certified as a new tenant.

However, if Michael and Jason’s combined income exceeded the income limit for a two-person household in October of 2007, then Jason must be certified as an income-qualified tenant when Michael moves out.*

If a state agency determines that the tenants manipulated the income limitation requirements, then the unit should not be treated as a low-income unit as of the date the household initially occupied the unit.

Example 4: New Tenants Manipulated Income Limitations

An income-qualified household consisting of one person moved into a two bedroom unit on March 15, 2005. A second tenant completed an initial income certification and joined the household soon thereafter. The combined income of the two tenants is above in income limit for a household with two members. The unit is out of compliance as of March 15, 2005.

Family Size Decreases

Decreases in family size do not trigger the immediate income certification of a new household. Subsequent annual income recertifications will be based on the income of the remaining members of the household. If the remaining household’s income is more than 140 percent (170 percent in deep rent skewed projects) of the income limit at the time of the annual income recertification, then the Available Unit Rule is applicable. 13

Example 1: Member of the Household Leaves

A married couple, with their two children, was initially income qualified and occupied a three bedroom unit. After four years, the oldest child, now 18 years old, moves out of the unit. It is not necessary to certify the remaining household as a new household. If the household’s income exceeds *140 percent of the income limit (170 percent in deep-skewed projects)* for a family with three members at the next income recertification, the Available Unit Rule is applicable.

13 See the legislative history for IRC §42, which notes that if the tenant’s income increases to a level more than 140 percent above the otherwise applicable ceiling (or if the tenant’s family size decreases so that a lower maximum family income applies to the tenant), that tenant is no longer counted in determining whether the project satisfies the set-aside requirement. The explanation continues, stating that there is no penalty in such cases if the Next Available Unit Rule is applied.


Revised October 2009

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