Many investors are looking for passive loss deductions to reduce their taxable income. Low-income housing projects can provide a steady stream of annual losses to reduce their taxable income. It may take several projects to produce the desired amount of passive losses.
Most of these investors are higher income taxpayers that are subject to combined State and Federal income tax rates of 30% to 50%. Our target is to build a portfolio of projects that can provide losses which at a 40% tax rate will give them a return of four times their money over a ten-year period. For example: for an investor needing $100,000 of annual losses, their acquisition cost would be approximately $100,000 plus fees. This is a one-time payment to get over $1,000,000 of losses ($100,000 of losses per year over a ten-year period).
Housing & Tax Consultants, LLC can help put together a personalized portfolio of projects that provides the desired amount of tax losses. Each investor has their own unique group of projects which are owned by a newly formed general partnership. We do not combine multiple investors to avoid any issues with co-mingling. AHFA is a 1% general partner and the investor is a 99% general partner.
AHFA is responsible for the annual asset management making sure the lower-tier general partners maintain the property in good condition. AHFA is also responsible for preparing the annual tax returns.
We feel that diversification is also an important component to reduce risks involved in these types of investments and we strive to provide both economic and geographic diversification to help manage risks while providing the required amount of annual tax losses.
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