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If you live in a tax credit community and your spouse moves in and together you make too much money and arent in compliance with the tax credit guidelines what happens?

what is a tax credit community

Amanda Gross

Answered Last

It depends. One may be over-income if the community is mixed income. i.e. tax credit and market rate units. The next available unit rule would be applicable.

Over-Income Tenants

Inevitably, a household's income will change from year to year. When a household's income increases substantially, they may be considered "over-income" tenants.

Defining Over-Income Tenants

The definition of an over-income tenant differs under the two programs:
  • Under the HOME program, tenants are considered over-income if their income rises above the applicable Low or High HOME income limit.
  • LIHTC rules define over-income as having income above 140 percent of the applicable income limit (i.e. the income limit under which the tenant originally qualified - typically either the 50 percent or 60 percent limit).
  • Rules for Treatment of Over-Income Tenants

    Although both programs permit the tenant to remain in the unit, the LIHTC program continues to restrict the rent until the unit is replaced, while HOME permits the rent to be raised to 30 percent of the tenant's adjusted income (up to local market rent in floating units). To resolve this conflict, HOME rules state that when funds from both programs are used on the same unit, the LIHTC rules should be followed.

    In general, however, if a tenant in a partially-assisted project is over-income, there is a risk that the LIHTC will be lost, and/or that HOME funds will have to be repaid. In order to avoid this consequence, owners have to comply with LIHTC and/or HOME rules for maintaining compliance when a tenant goes over income.

    The Impact of Over-Income Tenants on Ongoing Occupancy Requirements

    If a household's current annual income exceeds the eligibility limit, the unit continues to qualify as a HOME and/or housing tax credit unit as long as the owner fills the next available unit with an eligible household. However, this requirement applies only to projects that are not 100 percent LIHTC or 100 percent HOME. For 100 percent LIHTC projects and 100 percent HOME projects, there are no negative consequences if a household goes over-income.
    • The HOME program defines "next available unit" as the next unit of similar or larger size.
  • The LIHTC program, however, defines "next available unit" as any unit in the same building that is of comparable or smaller size.
  • For more information on the Next Available Unit Rule and other housing tax credit issues, visit the Tax Credit Library.

    Tenant Fraud:

    Depending on the circumstance, it is possible that a household could be evicted for being over income if said household misrepresented their income at application or did not disclose all household members that would be residing in the unit.

    In regards to the specific question asked:

    Most Tax Credit Owner/Agent ( O/A) have applicants complete an extensive questionnaire at application. One of the questions commonly asked on these questionnaires are:
    1. What is your marital status
    2. Will anyone that is currently not in the household be joining the household in the next 12 months.
    • If the applicant is married, and answered No this could be considered fraud. If the applicant had answered yes, the O/A would then inform the applicant that her spouse would need to be included in the household and his income counted when determining the household's annual income to the applicable income limits unless the applicant certified that she is in the process of separation and the spouse would not be joining the household in the next twelve months.
    • If the applicant stated that no one would be joining the household in the next 12 months, and then added someone to the household, this could also be construed as fraud depending on the circumstance. Ie; if the applicant moved in on 1/1/2011 and then had her spouse move in on 2/1/2011 if she certified that her spouse would not move in or if she lied about her marital status. Some examples of when a adding a household member would be acceptable are adopting a child or a tenants mother falls and breaks her hip and needs to move in with her daughter to help care for her. Also, if after a move in a tenant meets the man of her dreams, gets engaged, gets married and he move-in with her.

    Ultimately, tenant fraud boils down to this. Did the applicant intentionally withhold or misrepresent information in order to qualify for the program?That being said, it's the O/A 's responsibility to perform due diligence. This means that if the O/A did not ask about marital status or whether there was any anticipated additions to the household at the application/move in, then the tenant cannot be held responsible for not providing information that wasn't even asked for nor can they be evicted for it. An O/A could incentivize the tenant to leave so that O/A can get the unit back into compliance. (offering to pay moving expenses, a couple months rent and security deposit for their new place)

    Category: Credit

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