Lawmakers have introduced a significant change to the tax code. Effective for tax years beginning on or after 01/01/2025, this legislation allows taxpayers to elect a 10-year depreciation period for new affordable housing constructed by them. This bold move aims to address the pressing need for affordable housing options across the nation, particularly for households with incomes no greater than 80% of the regional median income.
Understanding the Legislation:
The legislation defines “affordable housing” as residential units that are either occupied or restricted to occupancy by households meeting the specified income criteria. These units must cater to individuals or families whose income does not exceed 80% of the regional median income. Moreover, the definition encompasses housing that is deed-restricted as affordable under the provisions of the Fair Housing Act.
Qualifying Criteria:
It’s crucial to note that not all properties automatically qualify under this new provision. Properties exempted or abated for property tax purposes under the Long-Term Exemption Law are ineligible for the tax benefits outlined in the legislation. Similarly, if the taxpayer has received a subsidy for the construction of low and moderate-income housing, the property does not qualify for the extended depreciation period.
Benefits for Taxpayers:
Electing the 10-year depreciation period for qualifying affordable housing projects can yield significant tax benefits for taxpayers. By spreading out the depreciation over a longer period, taxpayers can reduce their taxable income each year, resulting in lower tax liabilities. This can lead to substantial savings over the life of the depreciation period, providing a valuable incentive for investors and developers to engage in affordable housing projects.
Impact on Affordable Housing Development:
The introduction of this legislation is poised to have a positive impact on affordable housing development initiatives. By offering enhanced tax benefits, policymakers aim to stimulate investment in this critical sector, ultimately expanding the availability of affordable housing options for low and moderate-income individuals and families. Moreover, the extended depreciation period can make these projects more financially viable, encouraging greater participation from developers and investors.
The passage of L. 2024, S1422 (c. 1) marks a significant step forward in addressing the affordable housing crisis. By providing taxpayers with the option to elect a 10-year depreciation period for qualifying affordable housing projects, lawmakers are actively promoting investment in this vital sector. As stakeholders navigate the complexities of the tax code, it’s essential to leverage these new provisions to maximize tax benefits and drive meaningful progress in affordable housing development.
In summary, this legislation represents a win-win scenario, offering tax advantages for taxpayers while advancing the noble goal of expanding access to safe and affordable housing for all.
For additional details and tax advice, please contact Martin D. Hauptman at (973) 243-7912 or via email at mhauptman@mblawfirm.com