This act provides an incentive for home developers to build, buy and refurbish housing for low-income taxpayers. The Low-Income Housing Tax Credit also provides a non-refundable credit for those who invest in low-income housing projects as a means of stimulating the flow of capital into this sector. The type of housing structures typically used for this credit are multi-family dwellings.

Watch: Tax Deduction Vs. Tax Credit

The Low-Income Housing Tax Credit was created as part of the Tax Reform Act of 1986. Residents of these housing projects cannot have incomes that exceed certain guidelines in order for the project to qualify for the credit. This part of the act has been extremely successful, and has created over a hundred thousand low-income housing units and several hundred million dollars in investment capital.