Mortgage Credit Certificate

First-time home buyers who meet certain qualifying income requirements, sales price and first-time home buyer guidelines may be eligible for a Mortgage Credit Certificate (MCC). New homes (never occupied) are eligible for a 50% tax credit. Existing homes (previously occupied) are eligible for a 30% tax credit.

The MCC is a tax credit that can reduce the federal income tax liability owed by the homeowner up to $2,000 per year for each and every year they occupy the home as their primary residence. An MCC must be used with a 30-year fixed rate mortgage, including those from FHA, USDA, VA and conventional loan types. An adjustable rate mortgage may be acceptable in some instances.

How Does an MCC Work?

Here’s an example. On a $148,000 mortgage with an interest rate of 4.5%, you might pay $6,660 in interest the first year. The MCC would allow you to take a federal income tax credit of $1,998 ($6,660 x 30%) for that year. You are also still able to claim a mortgage interest deduction for the remaining 70% of the mortgage interest you paid.

You don’t have to wait until tax time to reap the benefits of an MCC! Once you calculate your annual tax credit, you can revise your W-4 with your employer to reduce the amount of federal taxes withheld from your pay check. That $1,998 tax credit could then translate into an additional $167 in your monthly paycheck–money you can put toward your mortgage!

For more information, call Rob Yo the Mortgage Pro today at 919-322-8201 to answer any and all questions you may have.