Mortgage Credit Certificate – MCC Tax Credit
The MCC Tax Credit is a federal credit which may reduce potential federal income tax liability, creating additional net spendable income which borrowers may use toward their monthly mortgage payment. This MCC Tax Credit program may enable first-time homebuyers to convert a portion of their annual mortgage interest into a direct dollar for dollar tax credit on their U.S. individual income tax returns.
After an MCC is issued, the homeowner receives a tax credit equal to the product of the mortgage amount, the mortgage interest rate, and the “MCC percentage,” a rate the administering Housing Finance Agency (HFA) sets between 10 and 50 percent.
To be eligible, individuals must be first‐time home buyers, meet the program’s income and purchase price restrictions, and use the home as his/her primary residence. MCCs generally are subject to the same eligibility and targeted area requirements as Mortgage Revenue Bonds (MRBs).
The MCC program was established by the Deficit Reduction Act of 1984 and modified by the Tax Reform Act of 1986.
- Qualified homebuyers can credit 25% of their annual mortgage interest paid against their year-end tax liability. A tax credit is a dollar for dollar reduction in tax liability.
- Veteran’s and homebuyers in targeted areas can credit 40% of their annual mortgage interest paid against their year-end tax liability. A tax credit is a dollar for dollar reduction in tax liability.
- The tax credit is allowable every year for the life of the original mortgage (up to 30 years!)
- Available to first-time homebuyers statewide, Veterans and repeat homebuyers in targeted areas.
- Household income limits can vary depending on family size and property location.
- Provides a tax credit up to $2,000 a year as long as the homebuyer occupies the home and has a mortgage.
Here’s how the mortgage credit certificate works:
- You apply and qualify for the MCC tax credit with your lender
- At tax time, you get a dollar-for-dollar credit for a portion of the mortgage interest you paid, usually 20%.
- Your decreased tax liability allows you to submit a revised W-4 to your employer, reducing your monthly withholdings.
- You have potentially hundreds of dollars extra in your paycheck each month for your house payment.
This advertisement does not constitute tax advice. Please consult a tax advisor regarding your specific situation.
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