Kentucky Housing Corporation (KHC) uses LIHTC, sometimes simply referred to as housing credits, to promote the development of low-income rental housing through tax incentives. The program offers eligible property owners a 10-year tax credit for each unit created for low-income families.

Nonprofit and for-profit developers of affordable housing are eligible for LIHTC. The credit may be obtained two ways:

• Automatically, if the project will be financed with tax-exempt bonds
• Through an allocation by KHC from a competitive application process.

LIHTC must be used for one or more rent-restricted units available for long-term, continuous rental use. Generally, at least 20 percent of the units in a project must be rented to tenants earning 50 percent or less of the area median income, or 40 percent of the units must be rented to tenants earning 60 percent or less of the area median income. Rents charged to tenants cannot exceed 30 percent of the income limit applicable to the unit size, less an allowance for tenant-paid utilities. Only the units rented to low-income persons in a building qualify for LIHTC.

Buildings with four or fewer units are eligible for LIHTCs only if the project is part of a development plan of action sponsored by a state or local government or a qualified nonprofit organization.