VA HB1135

Creates a nonrefundable state income tax credit for taxpayers who own interests in affordable housing projects, equal to 50% of the difference between fair market rent and actual rent charged to qualifying tenants

Defines affordable housing projects as those with a 30-year commitment to reserving 60% of units for tenants earning less than 120% of area median income, adjusted for family size

Limits total credits to $5 million per taxable year, with pro rata allocation if applications exceed the cap

Applies to taxable years from January 1, 2026, through January 1, 2031, with unused credits carrying forward for up to five years

Allows pass-through entities (partnerships, LLCs, S corporations) to allocate credits to individual owners based on ownership interests or written agreements