Qualified Census Tract (QCT)

What Is a Qualified Census Tract?

A qualified census tract (QCT) is a neighborhood-sized area that the U.S. Department of Housing and Urban Development (HUD) has officially flagged as lower-income for the purposes of the Low-Income Housing Tax Credit (LIHTC). Census tracts are small statistical areas used by the Census Bureau, generally containing between 1,200 and 8,000 people.

The designation matters because tax-credit developments built in these tracts can earn a larger credit, known as the basis boost.

How It Works

Section 42(d)(5)(B) of the Internal Revenue Code sets the test. A tract is eligible if either:

• 50% or more of its households have incomes below 60% of area median gross income, or
• its poverty rate is at least 25%.

There is a cap. All the QCTs in one metropolitan area, or in the nonmetropolitan part of one state, taken together, may not hold more than 20% of that area’s population. Where eligible tracts exceed the cap, HUD ranks them and designates only enough to stay under it.

HUD republishes the list every year as new American Community Survey data arrive. To smooth out sampling quirks, it uses three overlapping five-year survey releases, and a tract must meet the test in at least two of them. The 2026 list was published on September 30, 2025, and applies to credit allocations made after December 31, 2025. A project that files a complete application while its site is on the list generally keeps that status if credits are allocated within 730 days.

A building located in a QCT can claim credits on 130% of its eligible basis. Separately, every state’s qualified allocation plan must give preference to projects in QCTs whose development contributes to a “concerted community revitalization plan.”

To check whether a specific address is in a QCT, use HUD User’s QCT and DDA lookup tool.

QCT vs. Difficult Development Area

A QCT is defined by the incomes of the people who live there. A difficult development area is defined by high housing costs relative to incomes. Both earn the same 130% boost, and HUD’s 2026 notice excludes QCT population when it selects DDAs, so an area is one or the other.

Criticisms and Limitations

The boost and the allocation plan preference both make tax credit deals in lower-income tracts easier to win and finance. In a 2015 case about Texas’s tax credit awards, the U.S. Supreme Court observed that federal law favors distributing the credits to housing in low-income areas. The nonprofit that brought that case argued that awarding too many credits in predominantly Black inner-city neighborhoods, and too few in predominantly white suburbs, kept housing segregated.

Supporters of the QCT rules counter that lower-income neighborhoods need reinvestment, and they note that the allocation plan preference is tied to a community revitalization plan. Each state decides how to balance these goals in its own scoring rules.