What does the Minimum Set-Aside election consist of on IRS Form 8609?

The Minimum Set-Aside election on IRS Form 8609 is crucial for determining the eligibility of a Low-Income Housing Tax Credit (LIHTC) property. The 40-60 option indicates that at least 40% of the residential units in a project must be rented to tenants whose income does not exceed 60% of the area median gross income. This choice is designed to ensure that a significant portion of the housing remains accessible to low-income households, thereby fulfilling the purpose of the LIHTC program.

In contrast, the other options represent different minimum set-aside elections that are not applicable when selecting the 40-60 option. The 30-70 option requires at least 30% of the units to be rented at or below 70% of AMGI, while the 20-50 option is for properties designating at least 20% of units for tenants earning no more than 50% of AMGI. The average income option allows for a mixed-income strategy that averages to 60% in terms of tenant income over the project's units, but it operates under different guidelines than the fixed percentages represented by the 40-60 option. Understanding these distinctions is essential for developers and investors in the LIHTC community