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What are Tax Credits?

Tax credits are government incentives that reduce the amount of taxes owed by individuals or businesses. They are often used to encourage investment in specific sectors, such as affordable housing and community development. Unlike tax deductions, which lower taxable income, tax credits provide a dollar-for-dollar reduction in tax liability, making them a powerful tool for funding projects that benefit communities.

Low-Income Housing Tax Credit 

The Low-Income Housing Tax Credit (LIHTC) is a federal program designed to encourage private investment in affordable housing. LIHTC provides tax credits to developers who build or renovate rental housing for low-income households. These tax credits help offset development costs, making it more financially feasible to offer affordable rent rates.

How It Works

  • Developers apply for LIHTC through their state’s housing finance agency.

  • Approved projects receive tax credits that can be used over a 10-year period.

  • Developers often sell these credits to investors in exchange for funding to build or rehabilitate housing.

  • In return, developers must maintain affordability requirements for a set period (typically 15-30 years).

Eligibility

  • LIHTC-funded properties must reserve a portion of units for households earning below a certain percentage of the area median income (AMI).

  • Since its creation in 1986, LIHTC has helped develop millions of affordable rental units across the U.S.

At CommonGround Ventures, we help our clients identify LIHTC-eligible projects, apply for funding, and structure partnerships that make these projects successful. Feel free to book a consult with us to get started.

Neighborhood Assistance Program (NAP) Tax Credits

The Neighborhood Assistance Program (NAP) Tax Credits is a state-level program (varies by state) designed to encourage businesses and individuals to invest in community development projects. By making financial contributions to approved nonprofits working in housing, job training, education, and economic revitalization, donors receive state tax credits that lower their tax burden.

How It Works

  • Businesses or individuals donate to approved nonprofit projects.

  • In return, they receive a percentage of their donation back in state tax credits (often 50%–70% of the donation amount).

  • The tax credits reduce their state tax liability, making it a win-win for both the donor and the community.

Eligibility

  • Nonprofits must apply for NAP certification to participate in the program.

  • Funds are used to support low-income housing, economic development, and social services.

  • Helps local organizations sustain long-term community impact.

  • You may check your eligibility with your state’s Department of Revenue or Economic Development website.

We also assist in identifying NAP-eligible projects and structuring contributions to ensure you maximize your tax savings. Feel free to book a consult with us to get started.

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