Form 8586 (Rev. 12-2016)
Page 2
General Instructions
Section references are to the Internal Revenue Code unless
otherwise noted.
Future developments. For the latest information about
developments related to Form 8586 and its instructions, such as
legislation enacted after they were published, go to
www.irs.gov/form8586.
Purpose of Form
Use Form 8586 to claim the low-income housing credit. This general
business credit is allowed for each new qualified low-income
building placed in service after 1986. Generally, it is taken over a
10-year credit period.
The portion of the low-income housing credit attributable to
buildings placed in service after 2007 is not limited by tentative
minimum tax.
Taxpayers, other than partnerships, S corporations, estates, or
trusts, whose only source of this credit is from those pass-through
entities, are not required to complete or file this form. Instead, they
can report this credit directly on Form 3800.
Qualified Low-Income Housing Project
The credit cannot exceed the amount allocated to the building. See
section 42(h)(1) for details.
The low-income housing credit can only be claimed for residential
rental buildings in low-income housing projects that meet one of the
minimum set-aside tests. For details, see the Instructions for Form
8609, Part II, line 10c.
Except for buildings financed with certain tax-exempt bonds, you
may not take a low-income housing credit on a building if it has not
received an allocation from the housing credit agency. No allocation
is needed when 50% or more of the aggregate basis of the building
and the land on which the building is located is financed with
certain tax-exempt bonds. The owner still must get a Form 8609
from the appropriate housing credit agency (with the applicable
items completed, including an assigned BIN). “Land on which the
building is located” includes only land that is functionally related
and subordinate to the qualified low-income building (see
Regulations sections 1.103-8(a)(3) and 1.103-8(b)(4)(iii)).
Recapture of Credit
There is a 15-year compliance period during which the residential
rental building must continue to meet certain requirements. If, as of
the close of any tax year in this period, there is a reduction in the
qualified basis of the building from the previous year, you may have
to recapture a part of the credit you have taken. Similarly, you may
have to recapture part of the credits taken in previous years upon
certain dispositions of the building or interests therein, unless you
follow the procedures to prevent recapture. See Recapture and
building dispositions in the Instructions for Form 8609-A, Annual
Statement for Low-Income Housing Credit, for details. If you must
recapture credits, use Form 8611, Recapture of Low-Income
Housing Credit. See section 42(j) for details.
Recordkeeping
Keep a copy of this Form 8586 together with all Forms 8609,
Schedules A (Form 8609) (and successor Forms 8609-A), and
Forms 8611 for 3 years after the 15-year compliance period ends.
Specific Instructions
Line 2. A decrease in qualified basis will result in recapture if the
qualified basis at the close of the tax year is less than the qualified
basis at the close of the first year of the credit period.
If the reduction in qualified basis at the close of the tax year also
results in a violation of the minimum set-aside requirement, then no
credit is allowable for the year.
Line 3. The credit for the year is figured on Form 8609-A for each
building. Attach a copy of each Form 8609-A you completed for the
tax year to Form 8586. Enter on line 3 the total credit from attached
Form(s) 8609-A for buildings placed in service before 2008.
Line 6. Estates or trusts. Allocate the low-income housing credit
on line 5 between the estate or trust and the beneficiaries in the
same proportion as income was allocated and enter the
beneficiaries’ share on line 6.
If the estate or trust is subject to the passive activity rules, include
on line 4 any low-income housing credits attributable to buildings
placed in service before 2008 from passive activities disallowed for
prior years and carried forward to this year. Complete Form 8582-
CR, Passive Activity Credit Limitations, to determine the allowed
credit that must be allocated between the estate or trust and the
beneficiaries. For details, see the Instructions for Form 8582-CR.
Line 9. A decrease in qualified basis will result in recapture if the
qualified basis at the close of the tax year is less than the qualified
basis at the close of the first year of the credit period.
If the reduction in qualified basis at the close of the tax year also
results in a violation of the minimum set-aside requirement, then no
credit is allowable for the year.
Line 10. The credit for the year is figured on Form 8609-A for each
building. Attach a copy of each Form 8609-A you completed for the
tax year to Form 8586. Enter on line 10 the total credit for attached
Form(s) 8609-A for buildings placed in service after 2007.
Line 13. Estates or trusts. Allocate the low-income housing credit
on line 12 between the estate or trust and the beneficiaries in the
same proportion as income was allocated and enter the
beneficiaries’ share on line 13.
If the estate or trust is subject to the passive activity rules, include
on line 11 any low-income housing credits attributable to buildings
placed in service after 2007 from passive activities disallowed for
prior years and carried forward to this year. Complete Form 8582-
CR, Passive Activity Credit Limitations, to determine the allowed
credit that must be allocated between the estate or trust and the
beneficiaries. For details, see the Instructions for Form 8582-CR.
Paperwork Reduction Act Notice. We ask for the information on
this form to carry out the Internal Revenue laws of the United
States. You are required to give us the information. We need it to
ensure that you are complying with these laws and to allow us to
figure and collect the right amount of tax.
You are not required to provide the information requested on a
form that is subject to the Paperwork Reduction Act unless the form
displays a valid OMB control number. Books or records relating to a
form or its instructions must be retained as long as their contents
may become material in the administration of any Internal Revenue
law. Generally, tax returns and return information are confidential,
as required by section 6103.
The time needed to complete and file this form will vary
depending on individual circumstances. The estimated burden for
individual taxpayers filing this form is approved under OMB control
number 1545-0074 and is included in the estimates shown in the
instructions for their individual income tax return. The estimated
burden for all other taxpayers who file this form is shown below.
Recordkeeping . . . . . . . . . . . . 5 hr., 44 min.
Learning about the law or the form . . . . . . . 52 min.
Preparing and sending the form to the IRS . . . 2 hr., 11 min.
If you have comments concerning the accuracy of these time
estimates or suggestions for making this form simpler, we would be
happy to hear from you. See the instructions for the tax return with
which this form is filed.
