LIHTC tools

LIHTC capital stack and sources and uses builder

Total development cost minus land and ineligible costs gives eligible basis; basis times the applicable fraction and the 9% or 4% rate, times ten years and the credit price, gives equity. Add the first mortgage the restricted rents support, soft funds and deferred fee, and what is left is the gap. Change any input and the stack redraws.

Credit type

9% competitive 4% with tax-exempt bonds

Costs and basis

Total development cost ($)

Land and acquisition of land ($) Not depreciable, so never in basis.

Other costs not in basis ($) Perm loan fees, syndication, reserves, commercial space.

Applicable fraction (%) Lower of the low-income unit and floor-space shares.

130% basis boost (QCT or DDA; or state-designated on a 9% deal)

Credits and equity

Applicable percentage

Rate used (%) Floors apply to most new deals. November 2026 computed: 8.24% / 3.53%.

Credit price ($ per $1 of credit) Assumption: CohnReznick surveyed median, June-July 2026. Use your syndicator's quote.

First mortgage (example inputs: use your own)

Units

Average tenant-paid rent ($/unit/month) After utility allowance. See the rent calculator for limits.

Other income ($/unit/month)

Vacancy and loss (%)

Operating expenses ($/unit/year)

Replacement reserves ($/unit/year)

Debt service coverage (x)

Interest rate (%) An example, not a quote.

Amortization (years)

Other sources

Soft funds: grants, HOME, state or local loans ($)

Deferred developer fee ($)

Bonds (4% deals)

Aggregate building basis ($) Depreciable basis before any boost. Blank uses eligible basis.

Tax-exempt bonds planned ($)

of which from issues dated after 2025 ($)

Funding gap

$2,960,133

Sources vs total development cost $28,000,00089.4% funded

Sources	Amount	Share of TDC
Tax credit equity	$17,406,450	62.2%
First mortgage	$5,633,417	20.1%
Soft funds	$1,000,000	3.6%
Deferred developer fee	$1,000,000	3.6%
Gap to fill	$2,960,133	10.6%
Total development cost	$28,000,000	100%

Credits

Eligible basis (TDC less land and ineligible costs)	$23,500,000
Qualified basis at 100.0% applicable fraction	$23,500,000
Annual credit at 9.00%	$2,115,000
Ten-year credits	$21,150,000
Equity at $0.823 per credit	$17,406,450

First mortgage

Effective gross income	$1,004,400
Expenses and reserves	$548,000
Net operating income	$456,400
Loan at 1.15x DSCR, 6.25%, 35-year amortization	$5,633,417

Get a financing quoteSends this stack's summary with your request.

As of October 30, 2026. Sources: IRC 42 (Cornell LII); Pub. L. 119-21 sec. 70422; Rev. Rul. 2026-21 (November 2026 rates); CohnReznick Housing Tax Credit Monitor (September 2026). An estimate, not tax or legal advice.

The formula

Eligible basis = TDC - land - costs not in depreciable basis Qualified basis = eligible basis x (1.30 if boosted) x applicable fraction Annual credit = qualified basis x applicable percentage Equity = annual credit x 10 x credit price NOI = units x (rent + other income) x 12 x (1 - vacancy) - units x (opex + reserves) First mortgage = NOI / DSCR / annual debt constant(rate, amortization) Gap = TDC - equity - first mortgage - soft funds - deferred developer fee

Worked example (the defaults)

An 80-unit, 9% deal costing $28,000,000. Take out $2,000,000 of land and $2,500,000 of costs outside basis and eligible basis is $23,500,000. With every unit low-income and no boost, the annual credit is $2,115,000 and the ten-year total $21,150,000, which raises $17,406,450 at $0.823. Rents of $1,100 plus $25 of other income, 7% vacancy and $6,850 per unit of expenses and reserves leave NOI of $456,400, which carries a $5,633,417 loan at 1.15x, 6.25% and 35 years. With $1,000,000 of soft funds and $1,000,000 of deferred fee, the gap is $2,960,133.

Assumptions to know

Rates: the 9% floor (IRC 42(b)(2)) covers new buildings that are not federally subsidized; the 4% floor (42(b)(3)) covers other buildings placed in service after 2020. Pick "IRS computed rate" for a building neither floor covers.
Credit price: equity per dollar of the investor's credits, before adjusters. The default is CohnReznick's surveyed median ($0.823, 93 properties, June to July 2026); prices vary by state, size and investor.
First-year credits are prorated by month as units lease up, and the deferred credits come in year 11. This builder treats all ten years as full, as most sources and uses do.
The state agency sizes credits to the gap (IRC 42(m)(2)), so a surplus here means fewer credits, not extra cash.
4% deals, the 25% test: 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 (Pub. L. 119-21 sec. 70422(b)). Bond test calculator.

Questions people ask

What is a LIHTC capital stack?

The list of money sources that pay a tax credit deal's total development cost: equity from selling the credits, a first mortgage sized from the restricted rents, soft loans or grants from public sources, and any developer fee the developer agrees to defer. Whatever those leave uncovered is the gap.

Why does a 4% deal usually show a bigger gap than a 9% deal?

A 4% credit raises a bit under half the equity of a 9% credit on the same basis (4 points of basis per year instead of 9), while the rents and so the first mortgage stay about the same. 4% deals close the difference with the 130% boost where the site qualifies, soft funds, a larger deferred fee and sometimes state credits.

Which costs come out of eligible basis?

Land, which is not depreciable, and costs that are not part of the building's depreciable basis: permanent loan fees, syndication and partnership costs, reserves, and commercial space. Costs paid with federal grants also come out (IRC 42(d)(5)(A)). Your cost certification sets the final number.

Can I use the state-designated basis boost on a 4% bond deal?

No. IRC 42(d)(5)(B)(v) lets a state agency designate a building for the 130% boost, but not a building whose credits come from tax-exempt bond financing. A bond deal gets the boost only in a HUD QCT or DDA.

Where do the default numbers come from?

The credit rates are the statutory floors (9% and 4%), which exceed the IRS computed rates for November 2026 (8.24% and 3.53%). The credit price default is the CohnReznick surveyed median of $0.823 (June to July 2026). Every other default, from cost to rent to loan rate, is an example to replace with your own numbers.