While we cannot get into the specific requirements here, you can do your own research once you know of the existence of these tax credits.
Remember, a tax credit reduces your bottom line tax liability. One dollar in tax credits saves you one dollar in taxes. That is different from a deduction (like depreciation or operating expenses), in which a one-dollar deduction might save you fifteen cents to thirty-five cents in taxes.
The three most common tax credits available to investors in real estate are as follows.
1. Rehabilitation tax credits for fixer-uppers.
2. Energy efficiency tax credits for installing energy efficient systems and appliances.
3. Low-income housing tax credits are a time-consuming but extremely profitable strategy. Although the credits are for your federal income taxes, you must call your state low-income housing agency for more details.
The IRS gives the credits to the states, and then the states award them to applicants. HUD information is also available online.