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10/26/2024

IRS Announces Historic Increases for 2025 Tax Credit Multipliers and Small State Minimums

By A.J. Johnson

On October 22, 2024, in Revenue Procedure 2024-40, the Internal Revenue Service (IRS) revealed significant increases for key tax credit multipliers and minimum thresholds for 2025, setting historic highs in several areas. These changes impact the Low-Income Housing Tax Credit (LIHTC) and Private Activity Bonds (PABs), vital funding sources for affordable housing and community development projects.

Critical Updates for 2025:

  1. 9% Tax Credit Multiplier Increase: The per capita multiplier for 9% tax credits will rise to $3.00 in 2025. This adjustment represents a notable increase, providing enhanced opportunities for affordable housing development.
  2. Private Activity Bonds Multiplier: The per capita multiplier for PABs will reach $130, a $5 increase from 2024. This marks the highest level recorded, further supporting the financing of essential infrastructure and housing initiatives.
  3. Historic Highs in Small State Minimums: Both the per capita multiplier for the 9% credit and PABs are at record levels. The small state minimums will also be unprecedented in 2025, with $3,455,000 set for the 9% credit and $388,780,000 for PABs.
  4. LIHTC Rehabilitation Minimum Increase: The minimum rehabilitation cost for the LIHTC will be $8,500 per low-income unit in 2025, reflecting a $200 rise over the previous year. This adjustment helps ensure that housing rehabilitation projects maintain adequate standards for quality and affordability.

Effective Date: All updated minimums and multipliers will take effect starting January 1, 2025.

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