February 14, 2006


Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC.  20549


Re:    Boston Financial Qualified Housing Tax Credits L.P. III
       Report on Form 10-QSB for the Quarter Ended December 31, 2005
       File Number 01-18462


Dear Sir/Madam:

Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of
1934, filed herewith is one copy of subject report.


Very truly yours,




/s/Stephen Guilmette
Stephen Guilmette
Assistant Controller





QH3-Q3.DOC



<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB


(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, 2005
                                      --------------------------------------

                                                         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 .


<PAGE>


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




                                TABLE OF CONTENTS
<TABLE>
<CAPTION>



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

Item 1.  Financial Statements

<S>                                                                                           <C>
         Balance Sheet (Unaudited) - December 31, 2005                                        1

         Statements of Operations (Unaudited) - For the Three and Nine
           Months Ended December 31, 2005 and 2004                                            2

         Statement of Changes in Partners' Equity (Deficiency)
           (Unaudited) - For the Nine Months Ended December 31, 2005                          3

         Statements of Cash Flows (Unaudited) - For the
           Nine Months Ended December 31, 2005 and 2004                                       4

         Notes to the Financial Statements (Unaudited)                                        5

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                                                7

PART II - OTHER INFORMATION

Items 1-6                                                                                    16

SIGNATURE                                                                                    17

CERTIFICATIONS                                                                               18

</TABLE>

<PAGE>


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

                                  BALANCE SHEET
                                December 31, 2005
                                   (Unaudited)


<TABLE>
<CAPTION>



Assets

<S>                                                                                               <C>
Cash and cash equivalents                                                                         $       720,415
Investment securities, at fair value (Note 1)                                                             718,993
Investments in Local Limited Partnerships (Note 2)                                                      2,812,727
Other assets                                                                                                1,018
                                                                                                  ---------------
   Total Assets                                                                                   $     4,253,153
                                                                                                  ===============

Liabilities and Partners' Equity

Accrued expenses                                                                                  $       450,934
Deposit on sale                                                                                             8,333
                                                                                                  ---------------
   Total Liabilities                                                                                      459,267
                                                                                                  ---------------

General, Initial and Investor Limited Partners' Equity                                                  3,795,843
Net unrealized losses on investment securities                                                             (1,957)
                                                                                                  ---------------
   Total Partners' Equity                                                                               3,793,886
                                                                                                  ---------------
   Total Liabilities and Partners' Equity                                                         $     4,253,153
                                                                                                  ===============

</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, 2005 and 2004
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                          Three Months Ended                    Nine Months Ended
                                                   December 31,         December 31,        December 31,       December 31,
                                                       2005                 2004                2005               2004
                                                 ----------------    ----------------     ---------------    ----------
Revenue
<S>                                              <C>                 <C>                  <C>                <C>
   Investment                                    $         17,418    $          1,083     $        70,037    $          2,821
   Other                                                   52,803              19,939              69,581             114,745
                                                 ----------------    ----------------     ---------------    ----------------
       Total Revenue                                       70,221              21,022             139,618             117,566
                                                 ----------------    ----------------     ---------------    ----------------

Expenses:
   Asset management fees, affiliate                        47,123              71,403             141,371             188,430
   Provision for valuation of advances
     to Local Limited Partnerships (Note 1)                     -            (218,773)                  -            (155,083)
   General and administrative
     (includes reimbursement to affiliate
     in the amounts of $125,341 and
     $342,186 in 2005 and 2004,
     respectively)                                        126,213             155,586             373,195             482,452
   Amortization                                             1,689               6,366               5,067              19,099
   Interest                                                     -               1,500                   -               4,500
                                                 ----------------    ----------------     ---------------    ----------------
       Total Expense                                      175,025              16,082             519,633             539,398
                                                 ----------------    ----------------     ---------------    ----------------

Income (Loss) before equity in losses of Local
   Limited Partnerships and gain
   (loss) on disposal/sale of investments in
   Local Limited Partnerships                            (104,804)              4,940            (380,015)           (421,832)

Equity in losses of Local Limited
   Partnerships (Note 2)                                 (119,892)           (231,729)           (247,563)           (686,668)

Gain (loss) on disposal/sale of investments
   In Local Limited Partnerships (Note 2)                  10,872             (52,500)           (405,701)             22,500
                                                 ----------------    ----------------     ---------------    ----------------

Net Loss                                         $       (213,824)   $       (279,289)    $    (1,033,279)   $     (1,086,000)
                                                 ================    ================     ===============    ================

Net Loss allocated:
   General Partners                              $         (2,138)   $         (2,793)    $       (10,333)   $        (10,860)
   Limited Partners                                      (211,686)           (276,496)         (1,022,946)         (1,075,140)
                                                 ----------------    -----------------    ---------------    -----------------
                                                 $       (213,824)   $       (279,289)    $    (1,033,279)   $     (1,086,000)
                                                 ================    ================     ===============    ================

Net Loss Per Limited Partner
   Unit (100,000 Units)                          $         (2.12)    $          (2.76)    $       (10.23)    $         (10.75)
                                                 ===============     ================     ==============     ================
</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 (DEFICIENCY)
                   For the Nine Months Ended December 31, 2005
                                   (Unaudited)



<TABLE>
<CAPTION>



                                                                                                     Net
                                                               Initial           Investor         Unrealized
                                            General            Limited            Limited           Gains
                                           Partners            Partner           Partners          (Losses)         Total

<S>                                     <C>                <C>                <C>                 <C>                <C>
Balance of March 31, 2005               $     (827,554)    $        5,000     $    5,651,676      $            -     $    4,829,122
                                        --------------     --------------     --------------      ---------------    --------------


Comprehensive Loss:
  Change in net unrealized
     gains on investment
     securities available for sale                   -                  -                  -               (1,957)          (1,957)
  Net Loss                                     (10,333)                 -         (1,022,946)                   -       (1,033,279)
                                        --------------     --------------     --------------       --------------     -------------
  Comprehensive Loss                           (10,333)                 -         (1,022,946)              (1,957)      (1,035,236)
                                        --------------     --------------     --------------       --------------     -------------

Balance at December 31, 2005            $     (837,887)    $        5,000     $    4,628,730       $       (1,957)    $   3,793,886
                                        ==============     ==============     ==============       ==============     =============


  The accompanying notes are an integral part of these financial statements.
</TABLE>


<PAGE>

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


                            STATEMENTS OF CASH FLOWS
              For the Nine Months Ended December 31, 2005 and 2004
                                   (Unaudited)


<TABLE>
<CAPTION>



                                                                                  2005             2004
                                                                              -------------   ---------------

<S>                                                                           <C>             <C>
Net cash used for operating activities                                        $  (2,614,866)  $      (60,282)

Net cash provided by investing activities                                         2,444,552          377,164

Net cash used for financing activates                                                     -         (101,564)
                                                                              -------------   --------------

Net increase (decrease) in cash and cash equivalents                               (170,314)         215,318

Cash and cash equivalents, beginning                                                890,729          366,997
                                                                              -------------   --------------

Cash and cash equivalents, ending                                             $     720,415   $      582,315
                                                                              =============   ==============

Supplemental disclosure of cash flow information:
   Cash paid for interest                                                     $           -   $        4,500
                                                                              =============   ==============

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

</TABLE>

<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-QSB 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, 2005. 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, 2005 and 2004.

1.   Investment Securities

The Partnership's investment securities are classified as "Available for Sale"
and are carried at fair value as reported by the brokerage firms at which they
are held, with unrealized gains or losses excluded from earnings and reported as
a separate component of partners' equity.

2.   Investments in Local Limited Partnerships

The Partnership has limited partnership interests in seventeen 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 Local Limited Partnerships 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.

The following is a summary of investments in Local Limited Partnerships at
December 31, 2005:
<TABLE>
<CAPTION>

Capital contributions paid to Local Limited Partnerships and purchase
<S>                                                                                                 <C>
   price paid to withdrawing partners of Local Limited Partnerships                                 $    31,351,363

Cumulative equity in losses of Local Limited Partnerships (excluding cumulative
   unrecognized losses of $55,479,951)                                                                  (24,018,702)

Cumulative cash distributions received from Local Limited Partnerships                                   (2,509,270)
                                                                                                    ---------------

Investments in Local Limited Partnerships before adjustments                                              4,823,391

Excess investment costs over the underlying assets acquired:

   Acquisition fees and expenses                                                                          1,995,817

   Cumulative amortization of acquisition fees and expenses                                                (618,475)
                                                                                                    ---------------

Investments in Local Limited Partnerships before impairment allowance                                     6,200,733

Impairment allowance on investments in Local Limited Partnerships                                        (3,388,006)
                                                                                                    ---------------

Investments in Local Limited Partnerships                                                           $     2,812,727

                                                                                                    ===============
</TABLE>


<PAGE>

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


                  NOTES TO THE FINANCIAL STATEMENTS (continued)
                                   (Unaudited)


2. Investments in Local Limited Partnerships (continued)

The Partnership has recorded an impairment 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, 2005 is $3,511,728. For the nine months ended
December 31, 2005, the Partnership has not recognized $3,335,149 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. Previously unrecognized losses of $70,984 were included in
losses recognized in the nine months ended December 31, 2005.

The Partnership's interests in six of its investments in Local Limited
Partnerships were sold during the nine months ended December 31, 2005, resulting
in a net loss of $435,977. In addition, the Partnership received additional
proceeds from the sale of its interests in Local Limited Partnerships which
occurred during the year ended March 31, 2005, resulting in the recognition of a
net gain of $30,276.

3.   Significant Equity Investee

The following Local Limited Partnerships invested in by the Partnership
represent more than 20% of the Partnership's total assets or equity as of either
December 31, 2005 or 2004 or net losses for the three months ended either
December 31, 2005 or 2004. The following financial information represents the
performance of these Local Limited Partnerships for the three months ended
December 31, 2005 and/or 2004:
<TABLE>
<CAPTION>

                                                                           2005              2004
                                                                       -------------    -------------
         Quartermill Associates, Limited Partnership
         <S>                                                           <C>              <C>
         Revenue                                                       $     535,938    $     493,393
         Net Loss                                                      $     (47,534)   $     (36,881)

         Riverfront Apartments, Limited Partnership
         Revenue                                                       $     433,650    $     425,694
         Net Loss                                                      $     (40,435)   $     (24,578)

         Ashley Place, Ltd.
         Revenue                                                       $         N/A    $     180,587
         Net Loss                                                      $         N/A    $     (17,546)

         Willow Lake Partners II, Limited Partnership
         Revenue                                                       $         N/A    $     169,213
         Net Loss                                                      $         N/A    $     (52,966)

         The Temple - Kyle, Limited Partnership
         Revenue                                                       $         N/A    $      90,039
         Net Loss                                                      $         N/A    $     (30,024)

         Elver Park Limited Partnership II
         Revenue                                                       $         N/A    $     105,592
         Net Loss                                                      $         N/A    $        (468)

         Elver Park Limited Partnership III
         Revenue                                                       $         N/A    $      86,342
         Net Loss                                                      $         N/A    $     (27,349)










</TABLE>

4.   Reclassifications

Certain reclassifications regarding provision for valuation of advances to Local
Limited Partnerships have been made to prior period financial statements to
conform to the current period presentation.


<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
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 Partnership accounts for its investments in Local Limited Partnerships using
the equity method of accounting. 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. 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 potential
impairment of its investments in Local Limited Partnerships. The investments are
reviewed for impairment whenever events or changes in circumstances indicate
that the Partnership may not be able to recover its carrying value. If an other
than temporary impairment in carrying value exists, a provision to reduce the
asset to fair value will be recorded in the Partnership's financial statements.

In January 2003, the FASB issued Interpretation No. 46 ("Interpretation"),
"Consolidation of Variable Interest Entities", which provides new criteria for
determining whether or not consolidation accounting is required. The
Interpretation, which was modified in December 2003 in order to address certain
technical and implementation issues, requires the Partnership to consider
consolidation or provide additional disclosures of financial information for
Local Limited Partnerships meeting the definition of a Variable Interest Entity
("VIE"). The Partnership was required to apply the Interpretation to the Local
Limited Partnerships meeting the definition of a VIE as of March 31, 2005.

This Interpretation requires consolidation by the Partnership of the Local
Limited Partnerships' assets and liabilities and results of operations if the
Partnership determined that the Local Limited Partnerships were VIEs and that
the Partnership was the "Primary Beneficiary". Minority interests may be
recorded for the Local Limited Partnerships' ownership share attributable to
other investors. Where consolidation of Local Limited Partnerships is not
required, additional financial information disclosures of Local Limited
Partnerships may be required. The Partnership has


<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)


Critical Accounting Policies (continued)

assessed the Interpretation and concluded that it is not the Primary Beneficiary
of any of the Local Limited Partnerships that meet the definition of a VIE. The
Partnership is involved with those VIEs as a non-controlling limited partner
equity holder. The Partnership is required to disclose its maximum exposure to
economic and financial statement losses as a result of its involvement with the
VIEs. The Partnership's exposure to economic and financial statement losses from
the VIEs is limited to its investment in the VIEs ($2,812,727 at December 31,
2005). The Partnership may be subject to additional losses to the extent of any
financial support that the Partnership voluntarily provides in the future.

Liquidity and Capital Resources

The Partnership had a decrease in cash and cash equivalents of $170,314 for the
nine months ended December 31, 2005. This decrease is attributable to cash used
for operation and purchases of investment securities, offset by proceeds
received from the sales of investments in Local Limited Partnerships and cash
distributions received from Local Limited Partnerships. Cash used for operations
includes $736,285 paid to the Managing General Partner for accrued asset
management fees.

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, 2005, $1,439,408 of cash,
cash equivalents and investment securities has been designated as Reserves.

To date, professional fees relating to various Property issues totaling
approximately $2,355,000 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 Managing General Partner might deem
it in its best interest to voluntarily provide such funds in order to protect
its investment. As of December 31, 2005, the Partnership has advanced
approximately $1,528,000 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 $2,558,000 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, at December 31, 2005, 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 to Limited Partners during the nine months ended
December 31, 2005. During 2006, the Managing General Partner will continue to
monitor the Partnership's Reserve levels to determine whether amounts of
available cash, due in large part to proceeds from the disposition of Local
Limited Partnerships, exceed reasonably necessary levels. If so, a distribution
to Limited Partners may be warranted. However, there can be no assurances as to
the amounts or timing of such a distribution.


<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

Three Month Period

For the three months ended December 31, 2005, the Partnership's operations
resulted in a net loss of $213,824 as compared to a net loss of $279,289 for the
same period in 2004. The decrease in net loss is due to a decrease in equity in
losses of Local Limited Partnerships and an increase in gain on disposal of
investments in Local Limited Partnerships. These are partially offset by a
decrease in recovery of provision for valuation of advances to Local Limited
Partnerships. The decrease in equity in losses of Local Limited Partnerships is
primarily due to the Partnership recognizing losses in the quarter ended
December 2004 relating to Local Limited Partnerships that were written off in
the quarter ended December 2005. The increase in gain on disposal of investments
in Local Limited Partnerships is due to an increase in distributions from
written off Local Limited Partnerships. The decrease in recovery of provision
for valuation of advances to Local Limited Partnerships resulted from the
reimbursement of advances in 2004 made to Local Limited Partnerships in previous
years, net of advances.

Nine Month Period

For the nine months ended December 31, 2005, the Partnership's operations
resulted in a net loss of $1,033,279 as compared to a net loss of $1,086,000 for
the same period in 2004. The decrease in net loss is due to a decrease in equity
in losses of Local Limited Partnerships, a decrease in general and
administrative expenses and an increase in investment revenue offset by an
increase in loss on disposal of investments in Local Limited Partnerships and a
decrease in recovery of provision for valuation of advances to Local Limited
Partnerships. The decrease in equity in losses of Local Limited Partnerships is
primarily due to the Partnership not recognizing losses relating to one Local
Limited Partnership where cumulative equity in losses and cumulative
distributions have exceeded its total investment and the Partnership recognizing
losses in the nine months ended December 2004 relating to Local Limited
Partnerships that were written off in the nine months ended December 2005.
General and administrative costs decreased primarily due to decreased charges
due to an affiliate of the Managing General Partner for administrative expenses
necessary for the operation of the Partnership partially offset by increased
legal expenses associated with litigation in which the Partnership is involved.
The increase in investment revenue is due to an increase in cash due to the
sales of interests in Local Limited Partnerships which is invested in investment
securities. The increase in loss on disposal of investments in Local Limited
Partnerships is due to the transfer of six Local Limited Partnerships during the
current year. The decrease in recovery of provision for valuation of advances to
Local Limited Partnerships resulted from the reimbursement of advances in 2004
made to Local Limited Partnerships in previous years, net of advances.

Portfolio Update

As of December 31, 2005, the Partnership's investment portfolio consisted of
limited partnership interests in seventeen Local Limited Partnerships, each of
which owns and operates a multi-family apartment complex and each of which has
generated Tax Credits. The Partnership's interests in four Local Limited
Partnership's were transferred on January 1, 2006 and another interest was
disposed of through an outright sale of a property in January 2006. Therefore,
the Partnership's investment portfolio consists of Partnership interests in
twelve Local Limited Partnerships. Since inception, the Partnership has
generated Tax Credits, net of recapture, of approximately $1,340 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.

Properties that receive low income housing Tax Credits must remain in compliance
with rent restriction and set-aside requirements for at least 15 years from the
date the property is completed. Failure to do so would result in recapture of a
portion of the property's Tax Credits. The Compliance Period of the thirteen
Properties in which the Partnership has an interest either have already expired
or will expire by December 31, 2006. The Managing General Partner has negotiated
agreements that will ultimately allow the Partnership to dispose of its interest
in five Local Limited Partnerships. It is unlikely that the disposition of any
of these Local Limited Partnership interests will
<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)

generate any material cash distributions to the Partnership. Six of the Local
Limited Partnerships in which the Partnership had an investment were sold during
the nine months ended December 31, 2005.

The Managing General Partner will continue to pursue the disposition of the
Partnership's remaining Local Limited Partnership interests. It is unlikely that
the Managing General Partner's efforts will result in the Partnership disposing
of all of its remaining Local Limited Partnership interests concurrently with
the expiration of each Property's Compliance Period. 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.

On or about July 13, 2004, Park G.P., Inc. ("Park") commenced litigation against
Boston Financial Qualified Housing Tax Credits L.P. IV ("QH IV") and its
purported general partners (collectively, the "Defendants") in Clay County,
Missouri (the "Missouri Action"), claiming that the Defendants breached the
relevant partnership agreement and their fiduciary duties owed to Park by, among
other things, failing to permit inspection of certain alleged "books and
records" of the Partnership. On or about October 7, 2004, Park sought leave of
the court to amend its petition to include claims for inspection of the alleged
"books and records" against the Partnership, Boston Financial Qualified Housing
Tax Credits L.P., Boston Financial Qualified Housing Tax Credits L.P. II, Boston
Financial Qualified Housing Tax Credits L.P. V, Boston Financial Tax Credit Fund
Plus, A Limited Partnership, Boston Financial Tax Credit Fund VII, A Limited
Partnership, and their purported general partners (collectively, the "New
Defendants"). On November 15, 2004, the court granted the requested amendment to
the petition. On or about October 8, 2004, Park moved the court for entry of a
temporary restraining order (a "TRO") compelling the Defendants and the New
Defendants to turn over the alleged "books and records" in conjunction with a
transaction Park was proposing entering into. On October 12, 2004, the court
denied Park's request for a TRO.

In October 2005, Park again sought leave of the court in the Missouri Action to
amend its petition, claiming that the Defendants were in violation of the
Partnership Agreement by disposing of interests in Local Limited Partnerships
following expiration of the Local Limited Partnerships' applicable Compliance
Period(s) without first obtaining limited partner consent. On or about October
11, 2005, Park moved the court for entry of a TRO prohibiting the Defendants
from entering into any agreement to sell, transfer or otherwise convey any
interest in Local Limited Partnerships. On October 14, 2005, the court denied
Park's request for a TRO. In December 2005, the court granted Park's request to
amend its petition, and the case remains in discovery.

The Defendants and New Defendants maintain that Park is not entitled to review
the alleged "books and records" requested and/or use the materials in secondary
market transactions because, among other things: (i) they are not "books and
records" of the relevant partnerships; (ii) Park does not seek to review them
for a proper purpose; and (iii) selective disclosure of the information to Park
would give it an unfair informational advantage in secondary market transactions
and may violate federal and/or state securities laws. Likewise, the Defendants
maintain that the Partnership may continue to periodically dispose of its
interests in Local Limited Partnerships because, among other things, said
dispositions do not constitute the sale "at one time" of "all or substantially
all of the assets of the partnership" pursuant to Section 5.4.2 of the
Partnership Agreement. The Defendants and New Defendants accordingly intend on
defending against all of the aforementioned claims vigorously. These entities
have not, however, formed an opinion that an unfavorable outcome is either
probable or remote. Therefore, their counsel refrains from expressing an opinion
as to the likely outcome of the case or the range of any loss.

On August 24, 2004, the Partnership,  Boston Financial  Qualified  Housing Tax
Credits L.P.,  Boston Financial Qualified Housing Tax Credits L.P. II,
Boston Financial Qualified Housing Tax Credits L.P. IV, Boston Financial
Qualified  Housing Tax Credits L.P. V, Boston Financial Tax Credit Fund Plus, A
Limited Partnership,  Boston


<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)

Financial Tax Credit Fund VII, A Limited Partnership, and Boston Financial Tax
Credit Fund VIII, A Limited Partnership (collectively, the "Partnerships"), and
their general partners commenced litigation against Everest Housing Investors 2,
LLC ("Everest 2") and several other Everest related entities (collectively, the
"Everest Entities") in Massachusetts state court, seeking a declaratory judgment
that certain materials the Everest Entities sought to inspect are not "books and
records" of the Partnerships and that the Everest Entities are in any case not
entitled to inspect said information under applicable partnership agreements,
partnership law or otherwise. On October 7, 2004, the Everest Entities filed an
answer and counterclaim against the Partnerships and their purported general
partners, claiming that they breached applicable partnership agreements,
partnership law and their fiduciary duties to the Everest Entities by failing to
make the purported "books and records" available. On January 12, 2005, the
Partnerships served a motion to amend their complaint to, among other things,
add a claim based on Everest 2's breach of a November 24, 2003 letter agreement
which compelled Everest 2 to keep confidential certain information
contemporaneously disseminated by four of the Partnerships to Everest 2. Having
received no opposition within the specified time, the Partnerships filed the
motion to amend with the proposed first amended complaint on January 31, 2005.
The Court has granted this Motion, and the discovery process is continuing.

The Partnerships maintain that the Everest Entities are not entitled to review
the materials requested and/or use the materials in secondary market
transactions because, among other things: (i) they are not "books and records"
of the Partnerships; (ii) the Everest Entities do not seek to review them for a
proper purpose; and (iii) selective disclosure of the information to the Everest
Entities would give them an unfair informational advantage in secondary market
transactions and may violate federal and/or state securities laws. The
Partnerships have not formed an opinion that an unfavorable outcome is either
probable or remote. Therefore, the Partnerships' counsel refrains from
expressing an opinion as to the likely outcome of the case or the range of any
loss.

Property Discussions

All but one Property in which the Partnership has an interest have stabilized
operations and operated above break-even as of September 30, 2005. One Property
generates 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 prior to the expiration of the Compliance Period. 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, by January 2006, the Managing General Partner negotiated
an agreement in the form of a Contingent Note with an unaffiliated entity in
exchange for the Partnership's interest in five Local Limited Partnerships:
Lexington, Fulton, Eaglewood, Kirkendall Heights and Briarwood II. The put
option agreements that were exercised on the five properties effecting the
transfer of the Partnership's interests resulted in the Partnership acquiring a
contingent note which provided for 50% of all future net cash receipts from such
Local Limited Partnership interests. On September 15, 2005 the Partnership
received $10,415 in exchange for the sale of the Contingent Notes, as the
Managing General Partner deemed the potential value of 50% of all future net
cash receipts to be immaterial. This transaction resulted in taxable income of
$10,415, or approximately $0.08 per Unit.

As previously reported, the Managing General Partner negotiated an agreement
with an unaffiliated entity to have the ability to transfer the Partnership's
interest in Poplar Village, located in Cumberland, Kentucky, to the unaffiliated
entity or its designee. The Managing General Partner had the right to put its
interest in the Local Limited Partnership at any time in exchange for a
Contingent Note that granted the Partnership 50% of all future net cash receipts
from the Local Limited Partnership interest. However, on September 15, 2005, the
Partnership renegotiated the put option entered into with the previously
mentioned unaffiliated third party instead. Effective January 1, 2006, the
Partnership put its interest in Poplar Village to an unaffiliated entity for
approximately $2,100 in lieu of the Partnership carrying a remaining interest in
the form of a Contingent Note. This transfer is projected to result in


<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)


Property Discussions (continued)

taxable income of approximately $341,000 or $3 per Unit. Based on the operating
performance of the Property, the Managing General Partner determined that there
was very little value above debt in the Property. The Managing General Partner,
in accordance with and as permitted by the Partnership Agreement, retained the
entire amount of net proceeds in Reserves. The Partnership no longer has an
interest in this Local Limited Partnership.

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 interest 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 Partnership's interest is
currently expected to occur in 2007 and 2008 for Shoreline and Waterfront,
respectively.

Willow Lake, located in Kansas City, had experienced operating difficulties for
many years. The original Local General Partner was replaced shortly after
construction completion with an affiliate of the Managing General Partner and
the Property's first mortgage was modified several times to avoid foreclosure.
The Partnership had advanced approximately $695,000 from Partnership Reserves.
Since the Compliance Period ended on December 31, 2004, and to eliminate any
future risk to the Partnership, the Managing General Partner commenced attempts
to sell the Property. On January 10, 2005, a sale of the Property to a third
party was consummated. After payment on Property debts, expenses and closing
costs, the Partnership received approximately $1,467,000 in net sales proceeds.
This sale will result in taxable income projected to be approximately
$2,988,000, or $30 per Unit. The Managing General Partner, in accordance with
and as permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves.

As previously reported, during 1994, the Local General Partner at Admiral Court,
located in Philadelphia, Pennsylvania, transferred its interest in the Local
Limited Partnership. The IRS subsequently conducted a compliance audit at the
Property and took the position that the Property is subject to recapture due to
non-compliance issues. The Managing General Partner disagrees with the IRS and
is working to resolve the matter. In the opinion of the Managing General
Partner, there is a risk that the Local Limited Partnership and, consequently,
the Partnership could suffer significant Tax Credit recapture. However, it is
not possible to quantify the potential amount at this time. The Property's Tax
Credit stream ended in 1999. Further, the Property suffered from poor location
and security issues. Vandalism caused an increase in maintenance and repair
expenses and negatively affected the Property's occupancy levels and tenant
profile, causing working capital and debt service coverage to drop below
appropriate levels. In 2003, the Managing General Partner and the Local General
Partner began to pursue disposition options of the Partnership's interest in the
Property. In the fall of 2003, a put option agreement was entered into that
allowed the Partnership to transfer its interest in the Local Partnership to the
Local General Partner after the expiration of the Compliance Period on December
31, 2003. On September 21, 2004, the Property was sold and the Partnership
received $75,000 in sales proceeds. The Partnership no longer has an interest in
this Property. The sale resulted in taxable income of $220,162, or approximately
$2 per Unit. The Managing General Partner, in accordance with and as permitted
by the Partnership Agreement, retained the entire amount of net proceeds in
Reserves.

As previously reported, increased competition for Georgetown II, located in
Georgetown, Delaware, has negatively impacted the Property's operations.
Although the Property has maintained a high level of occupancy, rental rates
have stagnated while expenses have continued to increase. In an effort to reduce
fixed expenses to improve cash flow, the Local General Partner refinanced the
Property's first mortgage during the first quarter of 2004, reducing the


<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)


Property Discussions (continued)

interest rate from 8% to 6%, which significantly improved the Property's
operating performance. The Property operated slightly above breakeven during
2004. The Property no longer generates Tax Credits and the Compliance Period
expired on December 31, 2004. In 2003, the non-profit affiliate of the state
housing finance agency that holds the Property's long-term ground lease offered
to transfer the land at little cost to the Partnership. The Managing General
Partner gave its consent to the transfer and, in order to reduce potential risk
to the Partnership and provide an exit strategy, concurrently executed a put
agreement for the Partnership's interest in the Local Limited Partnership with
the Local General Partner. The put agreement gives the Partnership the right to
transfer its interest to the Local General Partner for a nominal price.

As previously reported, operations at Westwood Manor, located in Flint,
Michigan, have suffered in recent quarters. Poor site management caused deferred
maintenance and curb appeal issues. The Partnership also advanced $50,000 from
Reserves to address the deferred maintenance issues at the Property during 2001.
The advance was to be repaid through operations, if available, with the Local
General Partner obligated to pay back 50% of the remaining balance should the
entire amount of the advance not be repaid by December 31, 2001. The Property
did not generate sufficient cash from operations to repay any of the
Partnership's advances. The Partnership has not yet made a demand from the Local
General Partner to meet his obligation to repay 50% of the advance. However, the
Managing General Partner and the Local General Partner have reached agreement on
an exit strategy on this Local Limited Partnership. The Local General Partner
received approval for a refinancing of the Property from the U.S. Department of
Housing and Urban Development ("HUD") and the refinanced mortgage was closed on
July 31, 2003. The Managing General Partner, in providing its approval of the
refinancing, received agreement from the Local General Partner to a put option
whereby the Partnership can dispose of its interest in the Local Limited
Partnership any time after December 31, 2003, when the Compliance Period
expired. The Partnership executed its put option, effectively disposing of its
interest on November 4, 2005. Part of the agreement included repayment of the
Partnership's $50,000 loan, the repayment of which would be waived by the
Managing General Partner if the Local General Partner is successful in obtaining
HUD approval of the Transfer of Physical Asset application.

As previously reported, during 1995 Kyle Hotel, located in Temple, Texas,
defaulted on its mortgage and the lender placed the Local Limited Partnership in
bankruptcy. Under the subsequent reorganization, the Local General Partner was
replaced by an affiliate of the Managing General Partner, and the Partnership
purchased the outstanding debt on the Property. The Property makes mortgage
payments in the amount of available cash flow to the Partnership. The Property
has consistently enjoyed high occupancy over the past several months. However,
commercial rental revenue has been eliminated by the inability to lease the
commercial space due to its odd configuration. The Managing General Partner will
continue in its attempts to dispose of the Partnership's interest in the Local
Limited Partnership. On December 30, 2004, the Managing General Partner
transferred the Local General Partner interest in the Local Limited Partnership
from an affiliate of the Managing General Partner to an affiliate of the Temple
Housing Authority, and the Partnership received net proceeds of $208,000 for
this Local General Partner interest. At that time, a put option agreement was
entered into between the Partnership and the Temple Housing Authority that could
be exercised any time subsequent to the end of the Property's Compliance Period.
The Partnership exercised its put option, transferring its interest in the Local
Limited Partnership on January 1, 2006. The Partnership received $206,155 for
this interest in January 2006. The Property's Compliance Period ended on
December 31, 2005. The Managing General Partner, in accordance with and as
permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves. This transfer is projected to result in a taxable loss of
approximately $649,000 or $6 per Unit. The Partnership no longer has an interest
in this Local Limited Partnership.

As previously reported, due to operating deficits in 2002 and 2003 at Tucson
Trails I and Tucson Trails II, located in Madison, Wisconsin, the Local General
Partner proposed a refinancing of the Properties. At the same time, the same
Local General Partner proposed a refinancing of the first mortgages of two other
Properties, Elver Park II and Elver Park III, also located in Madison,
Wisconsin, in which the Partnership had an interest but had enjoyed stable
operations for the last several quarters. The Managing General Partner agreed to
the refinancing of all four


<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)


Property Discussions (continued)

Properties, and all four Properties closed on their new first mortgages in
November 2003 with the Partnership receiving a total of $954,098 in cash from
refinancing proceeds. The Managing General Partner, in accordance with and as
permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves. The Managing General Partner and the Local General Partner
also entered into call and put options whereby the Local General Partner
received call options at the end of the Compliance Period for the Local Limited
Partnerships for a nominal amount. If the calls were not exercised within a six
month period, the Partnership had the option to put its interests to the Local
General Partner. The expiration of the Compliance Periods was no later than
December 31, 2004 for any of the four Properties. Effective May 31, 2005, the
Partnership's interests in all four Local Limited Partnerships were transferred
to the Local General Partner. The Partnership no longer has an interest in these
four Local Limited Partnerships. These sales resulted in taxable income
projected to be approximately $1,320,000, or $13 per Unit.

As previously reported, Fox Run Housing, located in Victoria, Texas, experienced
operating deficits in 2003 and the first half of 2004 due to decreased revenues
and increased expenses. The Property also suffered from deferred maintenance and
failed two consecutive HUD physical inspections in February and July 2004. In
addition, the Property defaulted on its HUD-insured mortgage loan in December
2003. Since the Property generated its last Tax Credits in 1999 and in order to
minimize risk to the Partnership, the Managing General Partner decided in late
August 2004 to transfer the Partnership's interest to an unaffiliated third
party in exchange for a Contingent Note that granted the Partnership 50% of all
future net cash receipts from such Local Limited Partnership interest. On
September 15, 2005, the Partnership, in exchange for the sale of the Contingent
Note, received $2,083 from the previously mentioned unaffiliated third party.
The Managing General Partner, in accordance with and as permitted by the
Partnership Agreement, will retain the entire amount of net proceeds from this
sale in Reserves. The Partnership no longer has an interest in this Local
Limited Partnership, as HUD approved the transfer effective July 15, 2005. This
sale resulted in taxable income projected to be approximately $1 million, or $10
per Unit.

As previously reported, in 2003 the Local General Partner of El Jardin, located
in Davie, Florida, expressed its desire to sell the Property to a third party
buyer. In April 2003, a realtor was hired to appraise the Property. In September
2004, the Local General Partner received an offer from a third party buyer that
was subsequently higher than the 2003 appraisal as a result of an updated market
valuation. On March 8, 2005, the Property was sold, and the Partnership received
approximately $2.9 million in sales proceeds during the six months ended
September 30, 2005. This sale resulted in taxable income of approximately $3.6
million, or $36 per Unit. The Managing General Partner, in accordance with and
as permitted by the Partnership Agreement, retained the entire amount of net
proceeds in Reserves. The Partnership no longer has an interest in this Local
Limited Partnership.

As previously reported, Ashley Place, located in Orlando, Florida, reached the
end of its Compliance Period on December 31, 2004. As a result, the Managing
General Partner was interested in selling the Partnership's interest in the
Property. Two real estate brokers with experience in multifamily property sales
were hired to do an appraisal of the Property. Their appraisals ranged from
approximately $4.1 million to $4.34 million. The Managing General Partner and
the Local General Partner agreed that the Partnership would transfer its
interest in the Property to the Local General Partner for $210,000. This would
result in the Partnership receiving the same level of proceeds as it would if
the Property were sold to a third party at a price of $4.34 million. On December
21, 2004, the Property was sold to the Local General Partner and $210,000 was
received by the Partnership. The Partnership no longer has an interest in the
Property. The Managing General Partner, in accordance with and as permitted by
the Partnership Agreement, retained the entire amount of net proceeds in
Reserves. The sale resulted in taxable income of $899,419, or approximately $9
per Unit.

As previously reported, Elmwood Delmar, located in Aurora, Colorado, has a first
mortgage with a prohibition of prepayment prior to December 2008. Given this
major impediment to sale and the Partnership's desire to transfer its interest
in the Local Limited Partnership since the Property's Compliance Period ended on
December 31, 2003, the Managing General Partner entered into a put option
agreement with an unaffiliated entity that would allow for the transfer of the
Partnership's interest in the Local Limited Partnership to the unaffiliated
entity for a nominal amount.


<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)


Property Discussions (continued)

On September 15, 2005, the Partnership effectively disposed of its interests in
Elmwood Delmar when the fund received $2,083 in exchange for the sale of a
Contingent Note that was created in conjunction with the put option entered into
with the unaffiliated third party. Based on the operating performance of the
Property, the Managing General Partner determined that there was very little
value above debt in the Property. The Managing General Partner, in accordance
with and as permitted by the Partnership Agreement, will retain the entire
amount of net proceeds from this transfer in Reserves. This transfer of
Partnership interest will result in a 2005 taxable income projected to be
approximately $928,000, or $9 per Unit. Upon HUD's approval to a Transfer of
Physical Assets application the Partnership will then have the ability to
finalize the transfer of its interest in this Local Limited Partnership to the
third party.

As previously reported, the Managing General Partner has reached an agreement
with the Local General Partner of West Dade and West Dade II, located in Miami,
Florida, to sell the Partnership's interests in both Properties. However,
approval to a Modified Transfer of Physical Assets application is required from
HUD that may delay the actual transfer until the middle of 2006. It is estimated
that this pending transfer will result in a cash distribution to the Partnership
of approximately $1,500,000, or $15 per Unit, which would be retained in
Reserves in accordance with and as permitted by the Partnership Agreement. The
transfer of interest would result in taxable income currently projected to be
approximately $3,500,000, or $35 per Unit.

Effective January 1, 2006, the Partnership put its interest to an unaffiliated
party in Altheimer, located in Altheimer, Arizona and Heather Oaks, located in
Oak Grove, Missouri, for approximately $2,100 each. The Managing General Partner
determined that these Properties had no residual value in excess of the
Properties' debt and putting the Partnership's interests in the Local Limited
Partnerships for $2,100 per property was in the best interest of the
Partnership. These transfers are expected to result in taxable income projected
to be approximately $193,000 and $151,000 for Altheimer and Heather Oaks,
respectively, or a combined $3 per Unit. The Managing General Partner, in
accordance with and as permitted by the Partnership Agreement, retained the
entire amount of net proceeds in Reserves. The Partnership no longer has an
interest in these two Properties.

An agreement has been reached, between the Managing General Partner and the
Local General Partner of Diversey Square, located in Chicago, Illinois on the
disposition of the Partnership's interest during the first half of 2006. This
disposition will ultimately require HUD's approval of the Transfer of Physical
Asset application.

Quartermill, located in Richmond, Virginia, was sold in January 2006, resulting
in net sales proceeds to the Partnership of $7,291,096 or approximately $73 per
Unit. This sale is expected to result in taxable income projected to be
approximately $7,700,000 or $77 per Unit. The Managing General Partner, in
accordance with and as permitted by the Partnership Agreement, has initially
retained the entire amount of net proceeds in Reserves. The Partnership no
longer has an interest in this Local Limited Partnership.

The Managing General Partner and Local Limited Partner have begun exploring an
exit strategy that would allow for a 2006 disposal of the Partnership's interest
in Wood Creek, located in Calcium, New York.




<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
                  32.1   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, 2005.


<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.


DATED: February 14, 2006          BOSTON FINANCIAL QUALIFIED HOUSING TAX
                                  CREDITS L.P. III

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




                                  /s/Jenny Netzer
                                  Jenny Netzer
                                  Executive Vice President
                                  MMA Financial, LLC