Tax Credit Calculations and Eligibility Overview

These flashcards cover key concepts related to tax credit calculations, applicable fractions, and eligibility requirements discussed in the lecture.

What is the formula to calculate the first year applicable fraction for tax credit units?

The applicable fraction is calculated by comparing the number of tax credit units to total units and the square footage of tax credit units to total square footage, selecting the lesser of the two.

How many tax credit units were identified in the building example?

There are three tax credit units in the building example.

What is the total square footage of tax credit units in the example?

The total square footage of tax credit units is 2,900 square feet.

What percentage is derived from the unit calculation of tax credit units to total units?

The unit calculation gives a percentage of 60%.

Which percentage do we use for the applicable fraction when calculating tax credits?

We use the lesser percentage, which in the example is 58.59% from the square footage calculation.

What is the eligible basis assumed for calculating the qualified basis in the example?

The eligible basis is assumed to be $1,500,000.

What is the calculation to find the qualified basis?

The qualified basis is found by multiplying the eligible basis by the applicable fraction.

What is the annual tax credit amount calculated based on the qualified basis and applicable credit percentage?

The annual tax credit amount calculated is $79,096.50.

how long is the tax credit period collection period?

Ten Years

What must be maintained throughout the life of the tax credit property to not lose credits?

The first year applicable fraction must be maintained or exceeded throughout the life of the tax credit property.

What is the consequence if a tax credit building falls below its first year applicable fraction during the credit period?

It will result in a percentage reduction of tax credits that may be claimed by the owner until it has been corrected.