Mortgage Credit Certificates

MORTGAGE CREDIT CERTIFICATES (MCC)

The MCC is a Federal Income Tax Credit program. An MCC provides a double bonus by increasing the loan amount you qualify for and it increases your take-home pay. This program entitles you to take a federal income tax credit of twenty percent (20%) of the annual interest you pay on your home mortgage.

Qualifications

Household income cannot exceed $82,800 for 1 or 2 persons and $96,600 for 3 or more persons.

You must not have owned a principal residence in the last three years.

You must occupy the home.

You must apply for the MCC through a participating Lender, and pay a non-refundable MCC application fee of .002 X the loan amount (1st and 2nd if applicable) (Example: $300,000 total loaned X .002 = $600.00 fee)

The maximum purchase price for Resale homes are $503,700 for Non-Targeted areas and $615,700 for Targeted areas.

The maximum purchase price for New homes are $490,000 for Non-Targeted areas and $598,900 for Targeted areas.

Recapture Tax

If you sell your home within nine years you may have to pay a recapture tax. Several conditions can exempt you from the recapture tax. Call us for more details. (619) 890-7447

Tax Credit versus Deduction

Assume a taxpayer named Bill with a $60,000 annual income buys a home financed for $300,000 at a 5.5% interest rate. Interest paid the first year is approximately $16,500. An MCC tax credit of 20% of interest paid would equal $3,300 (20% X $16,500 = $3,300).

	With MCC	Without MCC
Annual Income	$60,000	$60,000
Personal Exemption	-3,100	-3,100
Interest Deduction	-13,200	-16,500
Taxable Earnings	$43,700	$40,400
Tax from Table	$7,656	$6,831
MCC Credit	-3,300	0
Bill's Total Income Tax	$4,356	$6,831

Bill owes $2,475 less with an MCC than without one ($6,831 - $4,356 = $2,475). He can subtract the $3,300 from his total federal income tax liability, receiving a dollar for dollar savings. (A tax deduction is subtracted from the adjusted gross income before federal income taxes are computed. Therefore, with a deduction, only a percentage of the amount deducted is realized in savings).

This illustration is simplified for example purposes only. Actual figures may vary, and many other considerations may impact a person's actual tax debt.

To find out more about this program or how to get started please click here: First-Time Buyer Program