# What Is a Tax Credit (LIHTC) Apartment? | IBA > Tax credit apartments explained in plain language: the Section 42 LIHTC program, income and rent restrictions, TDHCA URL: https://incomebasedapartments.com/guide/what-is-a-tax-credit-apartment/ Last-Modified: 2026-10-12 Tags: what is a tax credit apartment, what is LIHTC housing, tax credit property meaning Housing Guides # What Is a Tax Credit (LIHTC) Apartment? Tax credit apartments explained in plain language: the Section 42 LIHTC program, income and rent restrictions, TDHCA's role in Texas, and why rent isn't based on your pay. By the Income Based Apartment Team [/about/ →](/about/) · Updated October 12, 2026 · 6 min read ![Families outside a well-maintained Texas garden-style apartment community](/images/featured/well-maintained-texas-garden-style-apartment-commu.webp) Please note This guide is general information, not legal or program advice. Rules change, and each property confirms its own rents, eligibility, and screening requirements. ## The Short Answer A tax credit apartment is a unit in a community that takes part in the federal **Low-Income Housing Tax Credit (LIHTC)** program. The program was created by the Tax Reform Act of 1986 and lives in **Section 42 of the Internal Revenue Code**. Developers receive tax credits for building or rehabilitating rental housing. In exchange, they agree to keep certain units affordable for many years. Those affordable units come with two kinds of limits: a **maximum household income** and a **maximum rent**. If you’re researching options, our tax credit apartment research [/tax-credit-apartments/ →](/tax-credit-apartments/) page explains how we look for communities that may fit your household. ## How the Program Works in Texas In Texas, the **Texas Department of Housing and Community Affairs (TDHCA)** awards the tax credits and monitors participating properties. Properties must follow program rules on who can rent restricted units and how much they can charge. They report to TDHCA and go through compliance reviews. Each year, income and rent limits are published for each area, based on HUD’s data. These are often called Multifamily Tax Subsidy Project (MTSP) limits. They vary by metro area, household size, and the income tier of the unit. ## Income Limits: Who Can Rent a Restricted Unit ![Diagram comparing an income limit with a restricted rent](/images/content/simple-diagram-showing-income-limit-versus-restric.webp) Restricted units are set aside for households earning up to a percentage of **Area Median Income (AMI)**. Common tiers are 50% and 60% of AMI. Some properties use income averaging, which lets individual units range from lower to higher tiers as long as the average stays within program rules. The dollar limit depends on your household size. A larger household has a higher limit. To see how this works, read our guide on how to qualify [/guide/how-to-qualify-for-tax-credit-apartment-texas/ →](/guide/how-to-qualify-for-tax-credit-apartment-texas/) . ## Rent Limits: Why Rent Isn’t Based on Your Pay This is the part that surprises most renters. Tax credit rent is capped, but it isn’t calculated from your income. | Question | Tax credit (LIHTC) unit | Income-based rent (assistance programs) | | --- | --- | --- | | What sets the rent? | Program limits for the area, tier, and unit size | Your household income and program rules | | Does rent drop if I earn less? | Generally no | Generally yes | | Is a voucher required? | No | Depends on the program | | Is there a maximum income? | Yes | Yes, under program rules | The maximum rent for a unit is based on the income limit for its tier and an assumed household size for that bedroom count. If you pay some utilities, a utility allowance is subtracted from the cap. Many properties charge less than the maximum. So if two households with different incomes rent the same two-bedroom tax credit unit, they usually pay the same rent. Unless you also have a **Housing Choice Voucher** or other assistance, your rent isn’t a percentage of your income. Our guide on income-based vs income-restricted [/guide/income-based-vs-income-restricted-housing/ →](/guide/income-based-vs-income-restricted-housing/) housing walks through these differences side by side. > **Key takeaway** > > Tax credit apartments have restricted rents, not income-based rents. Restricted rent can still be a good value, but compare it to your actual budget. ## What a Tax Credit Community Looks Like ![Family carrying groceries up the stairs of an apartment building](/images/content/resident-family-carrying-groceries-up-the-stairs-o.webp) From the outside, many tax credit communities look like any other apartment complex. They range from garden-style buildings to mid-rise apartments, and some are age-restricted senior communities. Some are 100% restricted. Others mix restricted units with market-rate units. Living in one usually means a few extra steps. You’ll complete income certification before move-in, and many properties recertify income each year. You’ll also need to report household changes. ## Common Misunderstandings **“Tax credit means cheap.”** Rents are capped, but they aren’t always far below market. Compare total monthly cost. **“I need a voucher.”** You don’t. Vouchers can help, but they aren’t required. **“If I qualify on income, I’m approved.”** Not necessarily. Properties also screen for things like rental history and may use a minimum-income rule. **“It’s the same as public housing.”** It isn’t. Public housing is owned or managed through housing authorities and typically uses income-based rent. ## How We Help We research tax credit communities in Houston, Dallas, Fort Worth, Austin, San Antonio, and nearby suburbs, and record what we can verify: program type, published income limits for your household size, known minimum-income rules, and availability or waiting-list status, each with a date. Each community confirms its own eligibility and makes its own approval decisions. Got Questions? ## Common Questions ### Is a tax credit apartment the same as Section 8? No. LIHTC limits income and rent on designated units. Section 8 Housing Choice Vouchers are a separate rental assistance program run through local housing authorities. ### Who oversees tax credit properties in Texas? The Texas Department of Housing and Community Affairs (TDHCA) awards tax credits in Texas and monitors participating properties for compliance. ### Is my rent 30% of my income at a tax credit property? Usually not, unless you also have rental assistance. Tax credit rents are capped based on the area's income limits and the unit size, not your individual pay. ### Does every unit in a tax credit community have income limits? Not always. Some communities are fully restricted, while others mix restricted and market-rate units. Ask which units are restricted. Keep Reading ## Related Housing Guides Housing Guide ### Income-Based vs. Income-Restricted Housing Income-based rent, income-restricted units, tax credit communities, and lower minimum-income properties are different. See the comparison table and what each means for you. Read guide [Income-Based vs. Income-Restricted Housing →](/guide/income-based-vs-income-restricted-housing/) Housing Guide ### How to Qualify for a Tax Credit Apartment in Texas The eligibility factors Texas tax credit properties usually check: maximum income by household size and AMI tier, minimum-income screening, the student rule, and final decisions. Read guide [How to Qualify for a Tax Credit Apartment in Texas →](/guide/how-to-qualify-for-tax-credit-apartment-texas/) Housing Guide ### Can Full-Time Students Live in Tax Credit Apartments? How the full-time student rule works at tax credit (LIHTC) properties, the common exceptions in general terms, and why you should share student status in your request. Read guide [Can Full-Time Students Live in Tax Credit Apartments? →](/guide/full-time-students-tax-credit-apartments/) Housing Guide ### Using a Housing Choice Voucher at a Tax Credit Property in Texas How Housing Choice Vouchers and tax credit communities interact in Texas, how voucher acceptance generally works, and how to note voucher status in your request. Read guide [Using a Housing Choice Voucher at a Tax Credit Property in Texas →](/guide/housing-choice-voucher-tax-credit-property/) ## Learn more about Tax Credit Apartments See how we research tax credit apartments and what your list includes. Learn more [/tax-credit-apartments/ →](/tax-credit-apartments/) Get My Apartment List [/apartment-search-request/?type=tax-credit-apartments →](/apartment-search-request/?type=tax-credit-apartments)