LIHTC tools
25% bond test calculator
A 4% deal can now qualify with 25% instead of 50%: at least 25% of the aggregate basis of the building and land is financed by tax-exempt private activity bonds subject to the volume cap, and one or more of those bonds, from an issue dated after December 31, 2025, together finance at least 5% of that basis. It applies to buildings placed in service in taxable years beginning after December 31, 2025, and the 50% test still applies as an alternative. Enter your basis and land to see the bonds each test needs.
As of October 30, 2026. Sources: Pub. L. 119-21 sec. 70422(b); IRC 42(h)(4) (Cornell LII); Rev. Proc. 2025-32 sec. 4.19. An estimate, not tax or legal advice.
The formula
Worked example
A building with $30,000,000 of basis on $3,000,000 of land has $33,000,000 of aggregate basis. The old test needed $16,500,000 of bonds. The 25% test needs $8,250,000, with at least $1,650,000 from a 2026-or-later issue. A $9,000,000 issue in 2026 clears both parts of the 25% test at 27.3%, and uses $7,500,000 less volume cap than the 50% test ($8,250,000 less if sized at the 25% minimum).
What the calculator leaves out
Whether bond proceeds actually finance basis is a tracing question for bond counsel: proceeds spent on costs outside depreciable basis or land do not count, and the bonds must be "described in" IRC 42(h)(4)(A), meaning tax-exempt bonds taken into account under the section 146 volume cap. Many deals size bonds above the minimum for a margin of safety, since failing the test means losing the credits. Build the full 4% stack.
Questions people ask
What is the 25% bond test?
A 4% LIHTC building gets credits outside the state's 9% ceiling only if tax-exempt private activity bonds finance enough of the aggregate basis of the building and its land. Pub. L. 119-21 sec. 70422(b) added a 25% test beside the old 50% one: at least 25% of the aggregate basis of the building and land is financed by tax-exempt private activity bonds subject to the volume cap, and one or more of those bonds, from an issue dated after December 31, 2025, together finance at least 5% of that basis. It applies to buildings placed in service in taxable years beginning after December 31, 2025, and the 50% test still applies as an alternative.
Which buildings can use it?
Buildings placed in service in taxable years beginning after December 31, 2025. For a rehabilitation treated as a new building under IRC 42(e), the existing building and the rehab are both treated as placed in service on the 42(e)(4) date.
Is the 50% test gone?
No. IRC 42(h)(4)(B)(i) still allows the 50% test, so a deal financed entirely with bonds issued before 2026 can still qualify that way. The 25% test is a second route in (B)(ii).
Does the 25% count land?
Yes. The denominator is the aggregate basis of the building and the land it sits on. The basis boost does not raise it: the test uses actual basis, not the 130% figure.
What does this mean for volume cap?
Each 4% deal needs about half the bonds it used to, so a state's private activity bond cap ($135 per resident or $397,625,000, whichever is greater, for 2026 under Rev. Proc. 2025-32) can stretch across more projects.