Renting your buildings to section 8 tenants can help fill up your empty rentals while receiving a partially guaranteed rental payment from the government. While renting to section 8 tenants has a number of advantages to a landlord, no tax breaks are given for these rentals. There is a tax credit given for the development of low-income rental properties, but not for the actual renting itself.
Section 8 Housing
Section 8 is a government program to help low-income families afford housing. To qualify for a section 8 voucher, a person or family's income must fall below a set level. The income level varies across cities and depends on an area's average income. When a person qualifies for a section 8 voucher, he will receive assistance in paying his rent from the government. The government calculates a monthly amount he will need to pay himself, based on his income. The government will pay the remainder of rent to the landlord.
The main advantage of renting to section 8 tenants is that you collect rent that is partially paid by the government. Government section 8 payments are generally prompt, and you do not need to worry about the government defaulting on your payments. Another advantage of section 8 tenants is the large pool of available tenants. There are more tenants with section 8 vouchers than landlords willing to accept these renters. Taking on section 8 tenants can help you fill your vacancies. Because of these advantages of the section 8 program, the government does not give landlords an additional incentive with tax breaks.
Renting to section 8 tenants does has some disadvantages to consider. Before your apartment can be rented to tenants, the government will do a full inspection of your property and may require improvements before agreeing to the contract. This is an additional hassle over regular tenants. You have less control of your rental rate with the section 8 program. You cannot charge rent over the fair market rent level that is set by the government. These extra government restrictions are the cost of renting to section 8 tenants.
Low-Income Housing Tax Credit
The government does not give a tax credit for people who rent to low-income households, but there is a tax credit for producing low-income apartments. You qualify for this credit if you build a rental property and set a portion of the apartments, at least 20 percent, for use only by low-income households. You will be required to charge a below-market rental rate on these apartments. The amount of credit you can take against your income is determined by the cost of the building and must be taken over a 10 year credit period.