UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q


(Mark One)

[ X ]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

For the quarterly period ended         December 31, 2008
                           --------------------------------------

                                                         OR

[   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934


For the transition period from                   to
                               -------------             -------------------


                         Commission file number 01-18462

            Boston Financial Qualified Housing Tax Credits L.P. III
-------------------------------------------------------------------------
                (Exact name of registrant as specified in its charter)


           Delaware                                     04-3032106
------------------------------------     -------------------------------------
 (State or other jurisdiction of          (I.R.S. Employer Identification No.)
  incorporation or organization)


   101 Arch Street, Boston, Massachusetts                  02110-1106
--------------------------------------------       ---------------------------
  (Address of principal executive offices)                 (Zip Code)


Registrant's telephone number, including area code      (617) 439-3911
                                                   -----------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                   Yes X No .

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ___                       Accelerated Filer  ___
Non-accelerated filer   ___  (Do not check if a   Smaller reporting company X
smaller reporting company)                                               _____



Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).

                             Yes     No X .
                               ____    ____



<PAGE>


             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                             (A Limited Partnership)









                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
<S>                                                                                         <C>

PART I - FINANCIAL INFORMATION                                                              Page No.
------------------------------                                                              --------

Item 1.  Financial Statements

         Balance Sheet (Unaudited) - December 31, 2008                                          1

         Statements of Operations (Unaudited) - For the Three and Nine
           Months Ended December 31, 2008 and 2007                                              2

         Statement of Changes in Partners' Equity
           (Unaudited) - For the Nine Months Ended December 31, 2008                            3

         Statements of Cash Flows (Unaudited) - For the Nine Months
           Ended December 31, 2008 and 2007                                                     4

         Notes to the Financial Statements (Unaudited)                                          5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                                                  8

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                            13

Item 4.  Controls and Procedures                                                               13

PART II - OTHER INFORMATION

Items 1-6                                                                                      14

SIGNATURE                                                                                      15

CERTIFICATIONS                                                                                 16

</TABLE>

<PAGE>


          BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                      (A Limited Partnership)



                         BALANCE SHEET
                      December 31, 2008
                         (Unaudited)


<TABLE>
<CAPTION>
<S>                                                                                                 <C>

Assets
___________

Cash and cash equivalents                                                                      $     3,048,494
Investments in Local Limited Partnerships (Note 1)                                                      15,301

                                                                                       ------------------------
                                                                                               $     3,063,795
     Total Assets
                                                                                       ========================



Liabilities and Partners' Equity
________________________________

Due to affiliate(s)                                                                             $       37,584
Accrued expenses                                                                                        39,713

                                                                                       ------------------------
                                                                                                        77,297
     Total Liabilities



Partners' Equity                                                                                     2,986,498

                                                                                       ------------------------

     Total Liabilities and Partners' Equity                                                    $    3,063,795
                                                                                       ========================




</TABLE>

   The accompanying notes are an integral part of these financial statements.

<PAGE>
                    BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                                 (A Limited Partnership)

                                 STATEMENTS OF OPERATIONS
           For the Three and Nine Months Ended December 31, 2008 and 2007
                                     (Unaudited)

<TABLE>
<CAPTION>
<S>                                                    <C>           <C>                   <C>             <C>

                                                       Three Months Ended                   Nine Months Ended
                                                    December         December           December          December
                                                      31,              31,                31,               31,
                                                      2008             2007               2008              2007
                                                  -------------    -------------      -------------     -------------

Revenue
     Investment                                       $ 13,284         $ 32,528           $ 25,711          $439,951
     Other
                                                             -                -                  -               895

                                                  -------------    -------------      -------------     -------------
        Total Revenue                                   13,284           32,528             25,711           440,846
                                                  -------------    -------------      -------------     -------------


Expenses::
     Asset management fees, affiliate                   20,345           15,201             47,472            45,603
     Provision for valuation allowance on
        investments in Local Limited
        Partnerships (Note 1)                                -          585,476                  -           585,476
     General and administrative
        (includes reimbursement to an affiliate
        in the amounts of $35,262 and $45,887
        for the nine months ended
        December 31, 2008 and 2007,
        respectively)                                   30,987           54,677            120,806           176,149
     Amortization
                                                           221              539                665             1,618
                                                  -------------    -------------      -------------     -------------

        Total Expenses                                  51,553          655,893            168,943           808,846
                                                  -------------    -------------      -------------     -------------


Loss before equity in losses of
     Local Limited Partnerships and gain
     on sale of investments in
     Local Limited Partnerships                       (38,269)        (623,365)          (143,232)         (368,000)

Equity in losses of Local Limited
     Partnerships (Note 1)                                   -         (24,427)          (100,462)         (175,566)

Gain on sale of investments in Local
     Limited Partnerships (Note 1)                      15,046                -          1,838,090                 -
                                                  -------------    -------------      -------------     -------------


Net Income (Loss)                                   $ (23,223)       $(647,792)         $1,594,396        $(543,566)
                                                  =============    =============      =============     =============


Net Income (Loss) allocated:
     General Partners                                 $  (232)        $ (6,478)           $ 15,944         $ (5,436)
     Limited Partners                                 (22,991)        (641,314)          1,578,452         (538,130)

                                                  -------------    -------------      -------------     -------------
                                                    $ (23,223)       $(647,792)         $1,594,396        $(543,566)
                                                  =============    =============      =============     =============


Net Income (Loss) Per Limited Partner
     Unit (100,000 Units)                             $ (0.23)         $ (6.41)           $  15.78          $ (5.38)
                                                  =============    =============      =============     =============

</TABLE>

   The accompanying notes are an integral part of these financial statements.

<PAGE>

                    BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                                (A Limited Partnership)



                        STATEMENT OF CHANGES IN PARTNERS' EQUITY
                     For the Nine Months Ended December 31, 2008
                                    (Unaudited)

<TABLE>
<CAPTION>
<S>                                               <C>               <C>               <C>                 <C>

                                                                    Initial           Investor
                                                  General           Limited            Limited
                                                 Partners           Partners          Partners            Total
                                              ---------------    --------------    ---------------    --------------


Balance at March 31, 2008                          $  13,855         $   5,000         $1,373,247        $1,392,102

Net Income                                            15,944                 -          1,578,452         1,594,396
                                              ---------------    --------------    ---------------    --------------


Balance at December 31, 2008                       $  29,799         $   5,000         $2,951,699        $2,986,498
                                              ===============    ==============    ===============    ==============

</TABLE>

    The accompanying notes are an integral part of these financial statements.

<PAGE>
                     BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                               (A Limited Partnership)

                                STATEMENTS OF CASH FLOWS
                  For the Nine Months Ended December 31, 2008 and 2007
                                      (Unaudited)

<TABLE>
<CAPTION>
<S>                                                                         <C>                   <C>

                                                                             2008                 2007
                                                                        ----------------     ----------------


Net cash provided by (used for) operating activities                        $ (214,533)           $  286,105

Net cash provided by investing activities                                     1,838,090                    -

Net cash used for financing activities                                                -          (9,772,328)
                                                                        ----------------     ----------------
                                                                        -

Net increase (decrease) in cash and cash equivalents                          1,623,557          (9,486,223)

Cash and cash equivalents, beginning                                          1,424,937           10,969,239
                                                                        ----------------     ----------------


Cash and cash equivalents, ending                                           $ 3,048,494          $ 1,483,016
                                                                        ================     ================

</TABLE>

   The accompanying notes are an integral part of these financial statements



<PAGE>

                 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                               (A Limited Partnership)

                        NOTES TO THE FINANCIAL STATEMENTS
                              (Unaudited)


The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all of the
information and note disclosures required by accounting principles generally
accepted in the United States of America. These statements should be read in
conjunction with the financial statements and notes thereto included with the
Partnership's Form 10-KSB for the year ended March 31, 2008. In the opinion of
the Managing General Partner, these financial statements include all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Partnership's financial position and results of operations.
The results of operations for the period may not be indicative of the results to
be expected for the year.

The Managing General Partner of the Partnership has elected to report results of
the Local Limited Partnerships in which the Partnership has a limited
partnership interest on a 90-day lag basis because the Local Limited
Partnerships report their results on a calendar year basis. Accordingly, the
financial information of the Local Limited Partnerships that is included in the
accompanying financial statements is as of September 30, 2008 and 2007.

Generally, profits, losses, tax credits and cash flow from operations are
allocated 99% to the Limited Partners and 1% to the General Partners. Net
proceeds from a sale or refinancing will be allocated 95% to the Limited
Partners and 5% to the General Partners, after certain priority payments. The
General Partners may have an obligation to fund deficits in their capital
accounts, subject to limits set forth in the Partnership Agreement. However, to
the extent that the General Partners' capital accounts are in a deficit
position, certain items of net income may be allocated to the General Partners
in accordance with the Partnership Agreement.

1.   Investments in Local Limited Partnerships

The Partnership currently owns limited partnership interests in four Local
Limited Partnerships which were organized for the purpose of owning and
operating multi-family housing complexes, all of which are government-assisted.
The Partnership's ownership interest in each Local Limited Partnership is 99%.
The Partnership may have negotiated or may negotiate options with the local
general partners to purchase or sell the Partnership's interests in the Local
Limited Partnerships at the end of the Compliance Period at nominal prices. In
the event that Properties are sold to third parties, or upon dissolution of the
Local Limited Partnerships, proceeds will be distributed according to the terms
of each Local Limited Partnership agreement.
<TABLE>
<CAPTION>
<S>                                                                                                       <C>

The following is a summary of investments in Local Limited Partnerships at
December 31, 2008:

Capital contributions paid  to Local Limited Partnerships                                             $   8,855,847

Cumulative equity in losses of Local Limited Partnerships
     (excluding cumulative unrecognized losses of $57,777,620)                                          (6,655,895)

Cumulative cash distributions received from Local Limited Partnerships                                    (954,292)
                                                                                                --------------------
                                                                                               -

Investments in Local Limited Partnerships before adjustments                                              1,245,660

     Acquisition fees and expenses                                                                          221,032

     Cumulative amortization of acquisition fees and expenses                                              (69,915)
                                                                                                --------------------


Investments in Local Limited Partnerships before valuation allowance                                      1,396,777

Valuation allowance on investments in Local Limited Partnerships                                        (1,381,476)
                                                                                                --------------------


Investments in Local Limited Partnerships                                                              $     15,301
                                                                                                ====================


</TABLE>



<PAGE>
              BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                          (A Limited Partnership)

                  NOTES TO THE FINANCIAL STATEMENTS (continued)
                                   (Unaudited)


1. Investments in Local Limited Partnerships (continued)

The Partnership has recorded a valuation allowance for its investments in
certain Local Limited Partnerships in order to appropriately reflect the
estimated net realizable value of these investments.

The Partnership's share of the net losses of the Local Limited Partnerships for
the nine months ended December 31, 2008 is $2,453,762. For the nine months ended
December 31, 2008, the Partnership has not recognized $2,353,300 of equity in
losses relating to certain Local Limited Partnerships in which cumulative equity
in losses and distributions exceeded its total investments in these Local
Limited Partnerships.

During the nine months ended December 31, 2008, the Partnership sold its
interests in two Local Limited Partnerships, resulting in a net gain of
$1,838,090.

2.   New Accounting Principle

FIN48-3

In December 2008, the Financial Accounting Standards Board (`FASB") issued
Interpretation No. 48-3 "Effective Date of FASB Interpretation No. 48 for
Certain Nonpublic Enterprises" ("FIN48-3"). FIN48-3 deferred the effective date
of FIN48 for certain nonpublic organizations. The deferred effective date is
intended to give the FASB additional time to develop guidance on the application
of FIN48 by pass-through and not-for-profit entities. The General Partner may
modify the Partnership's disclosures if the FASB's guidance regarding the
application of FIN48 to pass-through entities chnages.

SFAS No. 157

In September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 157, "Fair Value Measurements" ("SFAS No. 157"), which provides enhanced
guidance for using fair value to measure assets and liabilities. SFAS No. 157
establishes a common definition of fair value, provides a framework for
measuring fair value under U.S. generally accepted accounting principles and
expands disclosure requirements about fair value measurements. SFAS No. 157 is
effective for financial statements issued in fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. In February
2008, the FASB issued FASB Staff Position 157-2, "Effective Date of FASB
Statement No. 157", which delays the effective date of SFAS No. 157 for all
nonfinancial assets and liabilities except those that are recognized or
disclosed at fair value in the financial statements on at least an annual basis
until November 15, 2008. The Partnership adopted the provisions of SFAS No. 157
for financial assets and liabilities recognized at fair value on a recurring
basis effective April 1, 2008. The partial adoption of SFAS No. 157 did not have
a material impact on the Partnership's Financial Statements. The Partnership
does not expect the adoption of the remaining provisions of SFAS No. 157 to have
a material effect on the Partnership's financial position, operations or cash
flow. This standard requires that a Partnership measure its financial assets and
liabilities using inputs from the three levels of the fair value hierarchy. A
financial asset or liability classification within the hierarchy is determined
based on the lowest level input that is significant to the fair value
measurement. The three levels are as follows:

     Level      1 - Inputs are unadjusted quoted prices in active markets for
                identical assets or liabilities that the Partnership has the
                ability to access at the measurement date.

     Level      2 - Inputs include quoted prices for similar assets and
                liabilities in active markets, quoted prices for identical or
                similar assets or liabilities in markets that are not active,
                inputs other than quoted prices that are observable for the
                asset or liability and inputs that are derived principally from
                or corroborated by observable market data by correlation or
                other means (market corroborated inputs).

     Level      3 - Unobservable inputs reflect the Partnership's judgments
                about the assumptions market participants would use in pricing
                the asset or liability since limited market data exists. The
                Partnership develops these inputs based on the best information
                available, including the Partnership's own data.

Financial assets accounted for at fair value on a recurring basis at
December 31, 2008 include cash equivalents of $3,048,494.
<PAGE>

              BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                       (A Limited Partnership)


                    NOTES TO THE FINANCIAL STATEMENTS (continued)
                                    (Unaudited)



3.   Significant Subsidiaries

The following Local Limited Partnership invested in by the Partnership
represents more than 20% of the Partnership's total assets or equity as of
December 31, 2008 or 2007 or net losses for the three months ended either
December 31, 2008 or 2007. The following financial information represents the
performance of these Local Limited Partnerships for the three months ended
September 30, 2008 and 2007:

<TABLE>
<CAPTION>
<S>                                                                         <C>                          <C>

                                                                               2008                      2007
                                                                          ----------------          ---------------
Riverfront Apartments, L.P.

Revenue                                                                       $  472,511               $  449,877
Net Loss                                                                      $  (54,953)               $ (24,673)

</TABLE>
<PAGE>


               BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                        (A Limited Partnership)



                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Certain matters discussed herein constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. The use of
words like "anticipate, "intend," "project," "plan," "expect," "believe,"
"could," and similar expressions are intended to identify such forward-looking
statements. The Partnership intends such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements and is
including this statement for purposes of complying with these safe harbor
provisions. Although the Partnership believes the forward-looking statements are
based on reasonable assumptions, the Partnership can give no assurance that its
expectations will be attained. Actual results and timing of certain events could
differ materially from those projected in or contemplated by the forward-looking
statements due to a number of factors, including, without limitation, general
economic and real estate conditions and interest rates.

Critical Accounting Policies

The Partnership's accounting policies include those that relate to its
recognition of investments in Local Limited Partnerships using the equity method
of accounting. The Partnership's policy is as follows:

The Local Limited Partnerships in which the Partnership invests are Variable
Interest Entities ("VIE"s). The Partnership is involved with the VIEs as a
non-controlling limited partner equity holder. The investments in the Local
Limited Partnerships are made primarily to obtain tax credits on behalf of the
Partnership's investors. The general partners of the Local Limited Partnerships,
who are considered to be the primary beneficiaries, control the day-to-day
operations of the Local Limited Partnerships. The general partners are also
responsible for maintaining compliance with the tax credit program and for
providing subordinated financial support in the event operations cannot support
debt and property tax payments. The Partnership, through its ownership
percentages, may participate in property disposition proceeds. The timing and
amounts of these proceeds are unknown but can impact the Partnership's financial
position, results of operations or cash flows. Because the Partnership is not
the primary beneficiary of these VIEs, it accounts for its investments in the
Local Limited Partnerships using the equity method of accounting. As a result of
its involvement with the VIEs, the Partnership's exposure to economic and
financial statement losses is limited to its investments in the VIEs ($15,301 at
December 31, 2008). The Partnership may be subject to additional losses to the
extent of any financial support that the Partnership voluntarily provides in the
future. Under the equity method, the investment is carried at cost, adjusted for
the Partnership's share of net income or loss and for cash distributions from
the Local Limited Partnerships; equity in income or loss of the Local Limited
Partnerships is included currently in the Partnership's operations. A liability
is recorded for delayed equity capital contributions to Local Limited
Partnerships. Under the equity method, a Local Limited Partnership investment
will not be carried below zero. To the extent that equity in losses are incurred
when the Partnership's carrying value of the respective Local Limited
Partnership has been reduced to a zero balance, the losses will be suspended and
offset against future income. Income from Local Limited Partnerships, where
cumulative equity in losses plus cumulative distributions have exceeded the
total investment in Local Limited Partnerships, will not be recorded until all
of the related unrecorded losses have been offset. To the extent that a Local
Limited Partnership with a carrying value of zero distributes cash to the
Partnership, that distribution is recorded as income on the books of the
Partnership and is included in "other revenue" in the accompanying financial
statements.

The Partnership has implemented policies and practices for assessing
other-than-temporary declines in values of its investments in Local Limited
Partnerships. Periodically, the carrying values of the investments are compared
to their respective fair values. If an other-than-temporary decline in carrying
value exists, a provision to reduce the asset to fair value, as calculated based
primarily on remaining tax benefits, will be recorded in the Partnership's
financial statements. The tax benefits for each Local Limited Partnership
consist of future tax losses, tax credits and residual receipts at disposition.
Included in the residual receipts calculation is current net operating income
capitalized at the regional rate specific to each Local Limited Partnership.
Generally, the carrying value of most Local Limited Partnerships will decline
through losses and distributions in amounts sufficient to prevent
other-than-temporary impairments. However, the Partnership may record similar
impairment losses in the future if the expiration of tax credits outpaces losses
and distributions from any of the Local Limited Partnerships.

<PAGE>


             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                         (A Limited Partnership)

                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


Liquidity and Capital Resources

At December 31, 2008, the Partnership has cash and cash equivalents of
$3,048,494 as compared with $1,424,937 at March 31, 2008. The increase is mainly
attributable to the proceeds received from the disposal of investments in Local
Limited Partnerships.

The Managing General Partner initially designated 3.00% of the Gross Proceeds as
Reserves as defined in the Partnership Agreement. The Reserves were established
to be used for working capital of the Partnership and contingencies related to
the ownership of Local Limited Partnership interests. The Managing General
Partner may increase or decrease such Reserves from time to time, as it deems
appropriate. During the year ended March 31, 1993, the Managing General Partner
increased the Reserve level to 3.75%. At December 31, 2008, $3,048,494 has been
designated as Reserves.

To date, professional fees relating to various Property issues totaling
approximately $2,379,000 have been paid from Reserves. To date, Reserve funds in
the amount of approximately $534,000 also have been used to make additional
capital contributions to four Local Limited Partnerships and the Partnership has
paid approximately $452,000 (net of paydowns) to purchase the mortgage of The
Kyle Hotel. In the event a Local Limited Partnership encounters operating
difficulties requiring additional funds, the Partnership's management might deem
it in its best interest to voluntarily provide such funds in order to protect
its investment. As of December 31, 2008, the Partnership has advanced
approximately $1,578,000 to Local Limited Partnerships to fund operating
deficits.

The Managing General Partner believes that the investment income earned on the
Reserves, along with cash distributions received from Local Limited
Partnerships, to the extent available, will be sufficient to fund the
Partnership's ongoing operations. Reserves may be used to fund Partnership
operating deficits, if the Managing General Partner deems funding appropriate.
If Reserves are not adequate to cover the Partnership's operations, the
Partnership will seek other financing sources including, but not limited to, the
deferral of Asset Management Fees paid to an affiliate of the Managing General
Partner or working with Local Limited Partnerships to increase cash
distributions. To date, the Partnership has used approximately $4,241,000 of
operating funds and proceeds from sales of investments in Local Limited
Partnerships to replenish Reserves.

Since the Partnership invests as a limited partner, the Partnership has no
contractual duty to provide additional funds to Local Limited Partnerships
beyond its specified investment. Thus, as of December 31, 2008, the Partnership
had no contractual or other obligation to any Local Limited Partnership which
had not been paid or provided for.

Cash Distributions

No cash distributions were made during the nine months ended December 31, 2008.
The Partnership is currently working on disposing of its interest in certain
Local Limited Partnerships during the next twelve months. These dispositions may
result in cash available for distribution, but due to the uncertainty of the
sales, no guarantees can be made as to the extent of their outcome on
distributions. Based on the results of 2007 Property operations, the Local
Limited Partnerships are not expected to distribute significant amounts of cash
to the Partnership because such amounts will be needed to fund Property
operating costs. In addition, many of the Properties benefit from some type of
federal or state subsidy and, as a consequence, are subject to restrictions on
cash distributions.

Results of Operations

Three Month Period

For the three months ended December 31, 2008, the Partnership's operations
resulted in net loss of $23,223 as compared to net loss of $647,792 for the same
period in 2007. The decrease in net loss is primarily due to an increase in the
provision for valuation allowance on investments in Local Limited Partnerships
in the 2007 period. Provision for valuation allowance on investments in Local
Limited Partnerships decreased due to the Partnership recording an impairment
allowance for its investment in a Local Limited Partnership in the 2007 period,
while no impairment was reflected in the 2008 period.


<PAGE>

               BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                       (A Limited Partnership)


                  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)


Results of Operations (continued)

Nine Month Period

For the nine months ended December 31, 2008, the Partnership's operations
resulted in net income of $1,594,396 as compared to net loss of $543,566 for the
same period in 2007. The increase in net income is primarily due to a gain on
sale of investments in Local Limited Partnerships recognized in the 2008 period,
and an increase in provision for valuation allowance on investments in Local
Limited Partnerships in the 2007 period, partially offset by a decrease in
investment revenue. The increase in gain on sale of investments in Local Limited
Partnerships is due to the sale of the investment in two Local Limited
Partnerships with large proceeds during the nine months ended December 31, 2008,
where as no Local Limited Partnerships were sold during the nine months ended
December 31, 2007. Provision for valuation allowance on investments in Local
Limited Partnerships increased due to the Partnership recording an impairment
allowance for its investment in a Local Limited Partnership in the 2007 period,
while no impairment was reflected in the 2008 year. The Partnership had a
decrease in investment revenue during the period ended December 31, 2008 related
to the reimbursement of interest during the prior year.

Portfolio Update

The Partnership was formed on August 9, 1988 under the laws of the State of
Delaware for the primary purpose of investing, as a limited partner, in Local
Limited Partnerships, which own and operate apartment complexes, most of which
benefit from some form of federal, state or local assistance program and each of
which qualify for low-income housing tax credits. The Partnership's objectives
are to: (i) provide current tax benefits in the form of tax credits which
qualified investors may use to offset their federal income tax liability; (ii)
preserve and protect the Partnership's capital; (iii) provide limited cash
distributions which are not expected to constitute taxable income during
Partnership operations; and (iv) provide cash distributions from sale or
refinancing transactions. The General Partners of the Partnership are Arch
Street III, Inc., which serves as the Managing General Partner, and Arch Street
III L.P., which also serves as the Initial Limited Partner. Both of the General
Partners are affiliates of MMA Financial, Inc. ("MMA"). The fiscal year of the
Partnership ends on March 31.

As of December 31, 2008, the Partnership's investment portfolio consisted of
limited partnership interests in four Local Limited Partnerships, each of which
owns and operates a multi-family apartment complex and each of which has
generated Tax Credits. Since inception, the Partnership generated Tax Credits,
net of recapture, of approximately $1,342 per Limited Partner Unit. The
aggregate amount of Tax Credits generated by the Partnership is consistent with
the objective specified in the Partnership's prospectus.

In October 2007, the Partnership distributed $9,674,581, or $96.75 per Unit to
Limited Partners, representing a distribution from the proceeds of previously
reported dispositions of sixty-three Properties and/or the Partnership's
investment in the Local Limited Partnerships owning these Properties. The
Managing General Partner anticipates making additional distributions in the
future.

Properties that receive low income housing Tax Credits must remain in compliance
with rent restriction and set-aside requirements for at least 15 calendar years
from the date the Property is placed in service. Failure to do so would result
in recapture of a portion of the Property's Tax Credits. The Compliance Period
of the four Properties in which the Partnership has an interest expired by
December 31, 2006. The Managing General Partner has negotiated agreements that
will ultimately allow the Partnership to dispose of its interest in two Local
Limited Partnerships.

The Partnership disposed of two Local Limited Partnership interests during the
nine month period ending December 31, 2008. The Managing General Partner will
continue to pursue the disposition of the Partnership's remaining Local Limited
Partnership interests. The Partnership shall dissolve and its affairs shall be
wound up upon the disposition of the final Local Limited Partnership interest
and other assets of the Partnership. Investors will continue to be Limited
Partners, receiving K-1s and quarterly and annual reports, until the Partnership
is dissolved.

<PAGE>

               BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                        (A Limited Partnership)

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Portfolio Update (continued)

The Partnership is not a party to any pending legal or administrative
proceeding, and to the best of its knowledge, no legal or administrative
proceeding is threatened or contemplated against it.


Property Discussions

Two Properties in which the Partnership currently has an interest had stabilized
operations and operated above breakeven as of September 30, 2008. Two Properties
generated cash flow deficits that the Local General Partner funds through
project expense loans, subordinated loans or operating escrows. However, some
Properties have had persistent operating difficulties that could either: (i)
have an adverse impact on the Partnership's liquidity; (ii) result in their
foreclosure; or (iii) result in the Managing General Partner deeming it
appropriate for the Partnership to dispose of its interest in the Local Limited
Partnership. Also, the Managing General Partner, in the normal course of the
Partnership's business, may arrange for the future disposition of its interest
in certain Local Limited Partnerships. The following Property discussions focus
only on such Properties.

As previously reported, the Managing General Partner anticipated the Fund's
interest in the Local Limited Partnership that owns Walker Woods, located in
Dover, Delaware, would be terminated upon the sale of the Property in late 2008.
On September 12, 2008 the underlying Property was sold, effectively terminating
the Partnership's interest in the Local Limited Partnership that owned Walker
Woods. The Partnership received $424,239, or $4.24 per Unit, for its interest in
this Local Limited Partnership. The Managing General Partner, in accordance with
and as permitted by the Partnership Agreement, has retained the sales proceeds
in Reserves for the time being until it deems a subsequent distribution to be
prudent. The Managing General Partner estimates this sale will result in 2008
taxable income projected to be approximately $900,000, or $9.00, per Unit. The
Partnership no longer has an interest in this Local Limited Partnership.

As previously reported, the Managing General Partner and Local General Partner
of Wood Creek, located in Calcium, New York, were exploring an exit strategy
that would result in a mid-2008 disposal of the Partnership's interest in the
Local Limited Partnership. On September 12, 2008 the underlying Property was
sold, effectively terminating the Partnership's interest in the Local Limited
Partnership that owned Wood Creek. The Partnership received $1,413,851, or about
$14.14 per Unit, for its interest. The Managing General Partner, in accordance
with and as permitted by the Partnership Agreement, has retained the sales
proceeds in Reserves for the time being until it deems a subsequent distribution
to be prudent. The Managing General Partner estimates this sale will result in
2008 taxable income projected to be approximately $1,500,000, or $15.00, per
Unit. The Partnership no longer has an interest in this Local Limited
Partnership.

As previously reported, the Managing General Partner planned to exercise the
Partnership's put option and transfer its interest in the Local Limited
Partnership that owns and operates Fourche Valley, located in Perryville,
Arkansas, in January 2008. Effective January 1, 2008, the Managing General
Partner exercised the Partnership's right to transfer the Partnership's interest
in Fourche Valley, for $5,000, or $.05 per Unit. The proceeds from this transfer
have been retained in Reserves in accordance with and as permitted by the
Partnership Agreement. The Managing General Partner estimates this transaction
will result in 2008 taxable income projected to be approximately $223,000, or
$2.23 per Unit. The Partnership no longer has an interest in this Local Limited
Partnership.


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          BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                        (A Limited Partnership)


                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
           FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)

Property Discussions (continued)

As previously reported, Waterfront and Shoreline, both located in Buffalo, New
York, continue to have operating deficits as a result of a soft rental market,
low occupancy and deferred maintenance, which impacts the marketability of the
developments. The mortgage loans on both Properties are payable only out of
available cash flow and neither Property has made mortgage payments in several
years. The Managing General Partner and the Local General Partner commenced
discussions regarding the options available to improve operations at, or dispose
of, the Properties. An agreement was reached whereby the Managing General
Partner would allow the Local General Partner to transfer its Local General
Partner interest to a developer that will re-syndicate the Properties. In
return, the Partnership obtained both a put option allowing the Partnership to
transfer its interests in the Local Limited Partnerships for a nominal sum and a
pledge by the incoming Local General Partner to pay any Tax Credit recapture
incurred due to the transfer of the Local Limited Partnerships prior to the end
of the Compliance Period. These transfers of the Local General Partner interests
occurred during April 2005. The transfer of the Partnerships interests are
currently expected to occur in the fiscal year ending March 31, 2010 and March
31, 2011, for Shoreline and Waterfront, respectively. The Managing General
Partner does not expect these transactions to result in net sales proceeds to
the Partnership. These transactions are expected to result in taxable income
projected to be approximately $43,000,000, or $430 per Unit.

As previously reported, with respect to the Partnership, a Settlement Agreement
providing options, subject to various conditions, to purchase the Partnership's
interests in River Front Apartments, L.P., located in Sunbury, PA, and
Susquehanna View, L.P., located in Camp Hill, PA, for an aggregate price of
$1,500,000, were not exercised. The Managing General Partner continues to
explore alternative exit strategies for these Local Limited Partnership
interests.

In accordance with the terms of their respective Partnership Agreements, the
Managing General Partner, effective November 28, 2007, transferred the
Partnership's interest in the Local Limited Partnerships that owned River Front
Apartments, L.P., located in Sunbury, PA, and Susquehanna View, L.P., located in
Camp Hill, PA. The interests in the aforementioned Partnerships were transferred
to MMA River Front, L.P., and MMA Susquehanna View, L.P. (together, the
"Transferee Partnerships"). The Partnership is the sole Limited Partner of each
of the Transferee Partnerships. An affiliate of the Partnership is the general
partner of each of the Transferee Partnerships and has obtained a 1% interest in
each of the Transferee Partnerships in exchange for a promissory note in favor
of the Partnership.

In processing these transactions, the Managing General Partner acted out of
necessity, due to the impending expiration of the Partnership's ability to
transfer its interest in the above-mentioned Local Limited Partnerships without
the Local General Partner's consent. As previously disclosed, these Local
Limited Partnership Interests were originally expected to be sold as part of a
settlement agreement between the Partnership, QH IV, QH V, QH VII, and certain
of their affiliates on the one hand, and on the other hand, Everest Housing
Investors 2, LP, certain of its affiliates, Park GP, Inc., Bond Purchase, L.L.C,
Anise, L.L.C., and Paco Development, L.L.C. (together, the "Everest and Park
Parties"). When the Everest and Park Parties failed to exercise their option to
purchase these Local Limited Partnership Interests, the above-described
transfers were carried out. The Managing General Partner may now have
flexibility in being able to dispose of the Partnership's interest in the Local
Limited Partnerships without the Local General Partners' consent, expediting the
Managing General Partner's ability to liquidate the assets of, and dissolve, the
Partnership. It is possible that such Local General Partner may contest this
right to free transferability.




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             BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                          (A Limited Partnership)


             QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Non Applicable

                             CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We conducted an evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange
Act, to ensure that information required to be disclosed by us in the reports
filed or submitted by us under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities
Exchange Commission's rules and forms, including to ensure that information
required to be disclosed by us in the reports filed or submitted by us under the
Exchange Act is accumulated and communicated to management to allow timely
decisions regarding required disclosure. Based on that evaluation, management
has concluded that as of December 31, 2008, our disclosure controls and
procedures were effective.

Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules
13a-15(f) and 15d-15(f). Our management conducted an assessment of the
effectiveness of our internal control over financial reporting. This assessment
was based upon the criteria for effective internal control over financial
reporting established in Internal Control -- Integrated Framework, issued by the
Committee of Sponsoring Organizations of the Treadway Commission.

The Partnership's internal control over financial reporting involves a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Internal control over
financial reporting includes the controls themselves, as well as monitoring of
the controls and internal auditing practices and actions to correct deficiencies
identified. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements.

Management assessed the effectiveness of the Partnership's internal control over
financial reporting as of December 31, 2008. Based on this assessment,
management concluded that, as of December 31, 2008, the Partnership's internal
control over financial reporting was effective.


<PAGE>

                BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                          (A Limited Partnership)




PART II       OTHER INFORMATION

Items 1-5     Not applicable

Item 6        Exhibits and reports on Form 8-K

(a)      Exhibits

31.1     Certification of Principal Executive Officer and Principal Financial
         Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2     Certification of Principal Executive Officer and Principal Financial
         Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1     Certification of Principal Executive Officer and Principal Financial
         Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2     Certification of Principal Executive Officer and Principal Financial
         Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter
    ended December 31, 2008


<PAGE>

                BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. III
                         (A Limited Partnership)


                              SIGNATURE




Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


Date: February 17, 2009            BOSTON FINANCIAL QUALIFIED HOUSING TAX
                                   CREDITS L.P. III

                                By:  Arch Street III, Inc.,
                                     its Managing General Partner



                                    /s/Greg Judge
                                     ____________
                                      Greg Judge
                                      President
                                      Arch Street III, Inc.


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