Did you know that first-time and low-to-moderate income homebuyers can potentially reduce their annual mortgage interest? The answer is the federal tax credit that is available through the Mortgage Credit Certificate (MCC) program.
This blog will explore how this works, the amount of money you can earn, and factors that will affect your savings, so you can decide if this program is worth your time and effort.
What is the Mortgage Credit Certificate Program?
The MCC program is a homebuyer assistance program designed to provide lower-income individuals with an opportunity for homeownership. The program will allow homebuyers to claim a dollar-for-dollar tax credit on a portion of the mortgage interest paid by the borrower.
This means that the amount of tax homebuyers owe during tax filing season is reduced through a tax credit, making housing payments a lot more affordable.
This tax credit is not available for all homeowners. To be eligible for the MCC, you need:
- To be a first-time home buyer, or you haven’t bought a home over the past three years
- The home is your primary residence
- Adhere to the purchase price and income limits that are based on the local housing market
- Obtain a mortgage through a participating lender
Depending on your circumstances, your state’s MCC program may also require that you participate in new home buyer counseling.
How the MCC Program Saves You Money
You’re likely wondering how much this program can save you, and the answer is: a maximum tax credit of $2,000 each year. The actual amount of the money that you’ll save is based on the calculation formula that takes into account your mortgage amount, the mortgage interest rate, and the mortgage credit certificate percentage. The percentage also depends on the amount of the original mortgage loan.
So how does it work? You can claim between 20% and 40% of your annual mortgage interest as a credit, depending on your state. For example, if you owe $15,000 in mortgage interest, you’ll deduct 20% to 40% off that amount and receive your tax credit.
To do this, you’ll need to complete the IRS Form 8396.
Factors Affecting Your MCC Savings
The actual amount in savings you’ll earn will depend on several different factors, from declining mortgage interest to non-refundable status. For example, if your tax bill is already low due to other deductions and credits, you may not be able to use the full MCC benefit.
Other factors, like refinancing your mortgage and MCC one-time fees, can also impact your potential savings.
Why Should You Get an MCC?
Other than tax savings, why should you consider an MCC? The program makes homeownership more affordable by offering broader eligibility requirements and increased flexibility. You may find you’re able to qualify for a higher loan amount with an MCC.
Make Your Dream Home a Reality With Florida State Mortgage Group, Inc.
If you’re ready to begin the process of purchasing your home in Florida, contact our team at Florida State Mortgage Group, Inc. today at (954) 359-3000 to make your dream a reality.
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