Use Form 8611 if a taxpayer is required to recapture part of the low-income housing credit they claimed in previous years because the qualified basis decreased from one year to the next or they disposed of a building, or their interest therein, and they did not follow the procedures that would have prevented recapture of the credit.
Decrease in qualified basis. The decrease may result from a change in the eligible basis or the applicable
fraction. For example, a decrease in qualified basis may exist when units are not occupied by income-qualified tenants under section 42(i)(3)(A)(ii), units are not rent restricted under section 42(g)(2), units are not suitable for occupancy as described in section 42(i) (3)(B)(ii), or the project no longer meets the minimum set-aside requirements of section 42(g)(1).
Building dispositions. Disposing of a building or an interest therein will
generate a credit recapture, unless it is reasonably expected that the building will continue to be operated as a qualified low-income building for the remainder of the building’s compliance period.
Recapture does not apply if:
- The taxpayer disposed of the building or an ownership interest in it and they satisfy the requirements for avoiding recapture as outlined earlier under Building dispositions;
- The taxpayer disposed of an ownership interest in a building they held through a partnership to which section 42(j)(5) applies;
- The decrease in qualified basis does not exceed the additions to qualified basis for which credits were allowable in years after the first year of the credit period; or
- The qualified basis is reduced because of a casualty loss, provided the property is restored or replaced within a reasonable period.
Accessing Form 8611 in the Desktop program: To access Form 8611, from the main menu of the tax return (Form 1040), select:
- Other Taxes
- Recapture of Low Income Housing Credit (8611) - You will be prompted to enter the required information to complete Form 8611.