J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

31.8 Special Tax Credits for Real Estate Investments

To encourage certain real estate investments, the tax law offers the following tax credits:

Low-income housing credit.

Qualifying investors are allowed to claim a tax credit in annual installments over 10 years for qualifying newly constructed low-income housing and certain existing structures that are substantially rehabilitated. The amount of the credit depends on whether the building is new and whether federal subsidies are received. If you are the building owner, you must receive a certification from an authorized housing credit agency on Form 8609. Investors who get their share of the credit from a pass-through entity (from a partnership, S corporation, estate, or trust) generally may claim their credit directly on Form 3800 (General Business Credit) and do not have to complete Form 8586, which otherwise must be used; see the Form 8586 instructions.

Building owners are subject to a 15-year compliance period during which recapture of the credit may be required (on Form 8611) if the building is disposed of or the qualified basis of the building is reduced. Owners must file Form 8609-A for each year of the compliance period.

Rehabilitation credit for pre-1936 buildings or certified historic structures.

On Form 3468, you may claim a 10% tax credit for rehabilitating pre-1936 buildings or a 20% credit for rehabilitating certified historic structures. The credit percentages are higher for buildings in the Midwestern disaster area ...