2027 IRS Inflation Adjustments for Affordable Housing

AJJCS  |  November 6, 2026

IRS Revenue Procedure 2026-35 was released on November 6, 2026, and increases the 2027 Low-Income Housing Tax Credit allocation amounts, raises the small-state minimum for the private activity bond volume cap, and increases the minimum rehabilitation expenditure amount under Section 42. The procedure also adjusts bond administration, property management accounting, and residents with ABLE accounts. Owners, developers, and housing agencies should incorporate the applicable amounts into their 2027 planning. [1]

Key housing amounts for 2027

¹ Revenue Procedure 2025-32 states the 2026 multiplier as $3.416, commonly rounded to $3.42. The increase to $3.53 is approximately 11 cents per resident. Sources: Revenue Procedure 2026-35, Sections 3.07, 3.08, and 3.21; Revenue Procedure 2025-32, Sections 4.07, 4.08, and 4.19. [1-2]

LIHTC allocation authority increases

For calendar year 2027, the population-based component of a state’s housing credit ceiling is the greater of $3.53 multiplied by the state’s population and $4,082,400. The small-state minimum increases by $128,800 from 2026. These amounts govern annual allocation authority, generally associated with competitively allocated 9 percent credits; the $3.53 figure is not a credit percentage applied to a development’s eligible basis.

For a state using the population formula, every million residents represents $3.53 million in annual credit authority under this component. Holding population constant, the increase from the IRS’s stated 2026 multiplier of $3.416 produces an additional $114,000 per million residents. Actual state ceilings also reflect applicable population figures and other statutory components, including carryforward and returned credits. The increase does not automatically increase an individual development’s award.

Private activity bond minimum rises while the per capita amount holds steady

For calendar year 2027, the state private activity bond volume cap is set at the greater of $135 per resident and $410,520,000. The per capita amount remains unchanged, but the small-state minimum increases by $12,895,000, approximately $12.9 million.

States using the minimum receive additional base allocation capacity. For states using the population formula, population changes can still affect the calculated ceiling even though the multiplier remains $135. The volume cap covers several categories of qualified private activity bonds, so the increase is not reserved entirely for multifamily housing.

For affordable housing, volume caps remain a financing consideration for developments financed with tax-exempt bonds and associated 4 percent LIHTCs. Developers should confirm state allocation priorities, application schedules, and available bond authority with the allocating agency. The new dollar amounts do not, in themselves, change the separate requirements for tax-exempt financing or bond-financed LIHTC eligibility.

LIHTC rehabilitation minimum increases

Revenue Procedure 2026-35 increases the inflation-adjusted per-low-income-unit amount under Section 42(e)(3)(A)(ii)(II) from $8,700 to $9,000. Under the general rehabilitation test, qualifying expenditures for the selected 24-month period must satisfy the greater of the 20 percent building-basis requirement and the per-unit qualified-basis requirement. [1-3]

The 20 percent requirement remains unchanged. More precisely, it uses the building’s adjusted basis at the start of the selected 24-month period, determined without the depreciation adjustments specified in Section 42(e)(3)(A)(ii)(I). This is commonly known as the depreciable acquisition basis test; it excludes land. The per-unit alternative requires that the average qualified rehabilitation basis be at least $9,000 per low-income unit. In mixed-income buildings, owners must apply the applicable fraction when translating this requirement into total rehabilitation expenditures.

For example, an entirely low-income, 40-unit building with $2 million of basis for the percentage test would need at least $400,000 in qualifying rehabilitation expenditures. The $9,000-per-unit calculation yields $360,000, so the $400,000 requirement controls. If the same building instead had $1.5 million of basis, the percentage calculation would yield $300,000, and the $360,000-per-unit requirement would control.

Owners should apply the test separately to each building, confirm the applicable year based on the rehabilitation’s placed-in-service timing, and document the selected 24-month period. Under Section 42, the rehabilitation expenditures are treated as placed in service at the close of that period. A housing agency’s rehabilitation standards may require spending above the federal minimum. [3]

Other provisions relevant to housing providers

ABLE accounts. Section 3.36 sets the amount included in the general aggregate contribution limitation for ABLE accounts at $20,000 for taxable years beginning in 2027. This is unchanged from the 2026 amount; eligible employed beneficiaries may qualify for additional contributions under separate rules. Housing staff should continue to apply the federal exclusion for ABLE accounts and distributions under the applicable income and asset rules. The contribution provision does not create a new countable-asset threshold for housing eligibility. [1-2, 4]

Applying the new amounts

The LIHTC allocation, rehabilitation, and private activity bond provisions apply to the relevant calendar-year 2027 transactions or events.

These IRS adjustments do not set new HUD income limits, LIHTC maximum rents, utility allowances, or HOTMA asset and deduction thresholds. Management should continue to use the separately issued guidance for each program.

Sources

1. IRS Revenue Procedure 2026-35
https://www.irs.gov/pub/irs-drop/rp-26-35.pdf

2. IRS Revenue Procedure 2025-32
https://www.irs.gov/pub/irs-drop/rp-25-32.pdf

3. Internal Revenue Code Section 42, especially subsections e and h
https://www.govinfo.gov/content/pkg/USCODE-2024-title26/html/USCODE-2024-title26-subtitleA-chap1-subchapA-partIV-subpartD-sec42.htm

4. HUD Notice H 2023-10 and PIH 2023-27 ABLE account treatment
https://www.hud.gov/sites/dfiles/OCHCO/documents/2023-10hsgn.pdf