Key Takeaways
- Form 8586 is used to summarize credits for buildings that provide low-income housing, specifically for pass-through entities like partnerships, S corporations, estates, and trusts.
- To obtain the low-income housing credit, you'll use Form 8609 to certify a building and allocate the credit amount, usually spread over 10 years. Each building in a multi-building project needs its own Form 8609.
- As a building owner, you must file Form 8609-A every year for 15 years to document that the building meets certification requirements. If the building doesn't continue to meet the requirements then the credit might be recaptured.
- You'll report the low-income housing credit on Form 3800, which includes the Employer Identification Number of a pass-through entity and the credit allocation amount.
The purpose of Form 8586
Form 8586 summarizes credits for qualifying buildings that provide low-income housing. Individual taxpayers are not required to complete Form 8586. Instead, the form is used by pass-through entities—such as partnerships, S corporations, estates, and trusts—that cannot originate a claim for the low-income housing credit elsewhere. Pass-through entities are business structures created to reduce or avoid the effects of double taxation.
Applying for the low-income housing credit
Form 8609 is used to certify a building qualifying for the low-income tax credit, as well as allocate the amount of the credit, which usually is spread over a 10-year period, either using Form 8586 or Form 3800. If you have a multi-building project, each building requires its own Form 8609. Credit allocations are made by housing credit agencies at the state or municipal level.
TurboTax Tip:
You won't complete Form 8586 as an individual taxpayer; it's for pass-through entities that can't claim the credit elsewhere.
Conditions for recapture of the credit
The building owner must file Form 8609-A annually for 15 years. And, the building must continue to meet certification requirements. If not, the owner may have to recapture a portion of the credit allocation using Form 8611, Recapture of Low-Income Housing Credit. Recapture refers to adding back income that a credit previously reduced.
Reporting the low-income housing credit on Form 3800
Form 3800, the General Business Credit, reports the Employer Identification Number of a pass-through entity and the amount of your credit allocation, if you have completed Form 8586 to establish your claim.
If you are an individual taxpayer and not an owner of a pass-through entity, you can report the low-income credit directly on Form 3800 without an EIN or completing form 8586.
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