Maryland Section 42 Tax Credit Property is a type of real estate investment that provides investors with an attractive tax incentive. It is also known as a low-income housing tax credit (LIH TC) or Tax Credit Exchange Program (CEP). Maryland Section 42 Tax Credit Property is a designated area of real estate that provides a tax break to investors who purchase and rehab existing residential homes or build new residential homes. The tax credits are provided by the State of Maryland to encourage the development of affordable housing. The two types of Maryland Section 42 Tax Credit Property are 9% and 4% tax credits. The 9% tax credit is for the new construction of residential homes and the rehabilitation of existing residential homes. The 4% tax credit is for the rehabilitation of existing residential homes only. Both credits require that the housing meet certain affordability requirements, such as the rent charged to tenants cannot exceed a certain percentage of the area median income. The tax credits are distributed through the Maryland Department of Housing and Community Development. The credits can be claimed for a period of 10 years and must be claimed in the order in which they were received. Additionally, the credits must be used for housing-related expenses, such as operating costs, construction costs, and rehabilitation costs.