The Tax Credit Specialist (TCS) certification is awarded by the National Center for Housing Management (NCHM) and is widely recognized as the leading professional credential for affordable housing compliance staff working with the Low-Income Housing Tax Credit (LIHTC) program. Properties funded through the LIHTC program under Section 42 of the Internal Revenue Code must maintain strict compliance with income, rent, and occupancy requirements, and TCS-certified professionals are responsible for ensuring that compliance at the property level.
This free TCS practice test PDF gives you printable, exam-style questions covering tenant income qualification, eligible basis calculations, rent limits, student rules, and compliance monitoring — the exact topics tested on the NCHM certification exam. Download the file, print it, and work through each question to identify gaps in your knowledge of Section 42 requirements before your certification date. Pair it with our online practice test for interactive, feedback-driven study.
The Low-Income Housing Tax Credit program was established under Section 42 of the Internal Revenue Code and is the primary federal mechanism for financing affordable rental housing in the United States. Credits are allocated to developers by state housing finance agencies (HFAs) and provide dollar-for-dollar reductions in federal tax liability over a 10-year credit period in exchange for maintaining affordable rents and income-restricted units over a minimum 30-year affordability commitment period (extended use period).
There are two credit rates: the 9% credit (also called the 70% present value credit) applies to new construction and substantial rehabilitation not financed with tax-exempt bonds, and the 4% credit (30% present value credit) applies to acquisition and projects financed with tax-exempt bonds. The annual credit amount equals the applicable credit rate multiplied by the qualified basis. The qualified basis is the eligible basis multiplied by the applicable fraction — the lesser of the unit fraction (tax credit units divided by total units) or the floor space fraction (square footage of tax credit units divided by total square footage). TCS candidates must understand each component of this calculation and how changes to the eligible basis or applicable fraction affect the credit amount and compliance obligations.
Correctly calculating and verifying household income is the most operationally intensive aspect of LIHTC compliance. At move-in, all household members must qualify based on their anticipated annual income, which is calculated by annualizing current income from all sources. Income inclusions under Section 42 (which follows HUD definitions) cover wages, salaries, tips, net self-employment income, Social Security and pension payments, unemployment and disability payments, alimony, child support, regular gifts and contributions, and income from assets. Income exclusions include employment income of full-time students (with exceptions), one-time lump-sum payments, and temporary income such as a non-recurring gift.
HUD publishes Annual Income Limits for each metropolitan statistical area and non-metro county, establishing the median family income (MFI) for the area. LIHTC units must be rented to households whose incomes do not exceed either 50% AMI or 60% AMI depending on the elected set-aside, with corresponding rent restrictions. The minimum set-aside election (the 20-50 test — at least 20% of units at 50% AMI, or the 40-60 test — at least 40% of units at 60% AMI) must be made irrevocably on IRS Form 8609 and defines the minimum compliance threshold, though most projects target deeper income levels. Income must be verified through third-party documentation: employer verification letters, pay stubs, Social Security award letters, bank statements, and signed tenant certifications are all part of the required documentation package in tenant files.
The student rule under Section 42 is one of the most tested compliance topics on the TCS exam. A household composed entirely of full-time students is generally ineligible for a tax credit unit. However, there are five statutory exceptions: the household receives assistance under Title IV of the Social Security Act (TANF); at least one member was previously in foster care; at least one member is enrolled in a job training program receiving assistance under the Workforce Investment Act or a comparable program; all members are single parents with children who are not dependents of another person; or the household consists of a married couple who files a joint tax return. Understanding which households trigger the student rule and which exceptions apply is essential for TCS certification.
Maximum gross rents for LIHTC units are set at 30% of the imputed income for the targeted income level, based on HUD income limits and bedroom size. Gross rent includes the tenant-paid rent plus a utility allowance — where the tenant pays utilities directly, the allowance must be subtracted from the maximum allowable rent to arrive at the maximum contract rent. Utility allowances must be updated at least annually. Annual recertification of tenant income is required on each tenant's anniversary date unless the property qualifies for the recertification exemption applicable to 100% affordable projects. When a household exceeds 140% of the income limit at recertification, the available unit rule governs: the over-income household may remain in the unit, but the next available unit of the same or smaller size in the same building must be rented to a qualifying household, and the over-income unit loses its qualified basis status until brought back into compliance.
Mastery of Section 42 compliance rules — from income calculation through student exceptions and recertification procedures — is the key to passing the TCS exam and succeeding in affordable housing management. After completing the printable PDF questions, sharpen your skills further with our full TCS practice test online and get instant explanations for every question.