A Mortgage Credit Certificate, also known as an MCC, is a federal tax credit that reduces the amount of federal income tax paid by the homeowner. The tax credit is equal to 40% of the mortgage interest paid during the tax year, up to a maximum $2,000 per year.
Homeowners are eligible for the tax credit every year, as long as they occupy the home as their primary residence. MCCs can save homeowners thousands of dollars over the life of their mortgage!
MCCs are also restricted to first-time home buyers. Please note that the definition of first-time home buyer is anyone who has not owned (or had ownership interested in) a primary residence in the past three years. The first-time home buyer requirement is waived for home buyers purchasing a home in a targeted area and qualified veterans.
To apply for an MCC, you must work with one of TSAHC’s approved lenders. The lender will help you fill out the application and ensure that you meet all of the requirements. Click here to find a participating lender in your area.
Please note that you must apply for the MCC BEFORE you close on your home loan. You cannot apply for the MCC after your loan has closed.
You must obtain a fixed-rate mortgage, but there are no restrictions on the type of loan, term or interest rate to apply for an MCC by itself.
If combining your MCC with TSAHC’s down payment assistance, you must obtain an FHA, VA, USDA or conventional loan that meets TSAHC’s requirements. TSAHC also sets the interest rates on the loan. Click here to learn more about TSAHC’s down payment assistance programs. You can also use our down payment assistance calculator to explore the loan type, interest rate and grant amount options.
It is your responsibility to claim your mortgage interest tax credit every year by filing a special IRS “8396” form. You have two options to take advantage of your credit. You can either adjust your W-4 withholding to have less taxes deducted from your paycheck each month, or you can leave your withholding the same and receive your entire credit when you file your taxes each year.
We encourage you to speak to a tax professional to determine which option is best for you.
A tax credit provides a dollar for dollar reduction of your income tax liability. For example, a $2,000 tax credit reduces your tax bill by $2,000. A tax deduction lowers your taxable income. A $2,000 deduction might reduce your tax bill by $300 to $500, depending on what tax bracket you're in.
You can take a tax deduction for any additional interest paid above the value of the tax credit. For example, if you paid a total of $5,000 in mortgage interest in one year, you would be able to take the maximum MCC tax credit of $2,000 (which is equal to 40% of your interest paid). You would also be able to take an itemized tax deduction for the remaining $3,000 in mortgage interest paid.
Your lender will consider income from all family members listed on the deed of trust to determine income eligibility. This includes income from a non-purchasing spouse. However, it would not include income from those that will not end up on the deed of trust. For example, if an 18 year old is working at the grocery store or if grandma is living with you and receiving social security.
Yes, but you must apply for a reissued MCC from TSAHC. The refinance loan must meet certain requirements to qualify for a reissued MCC. Your lender will be able to provide you with additional information. You can also reach out to us at 877-508-4611 for more information.
You may be subject to Recapture tax if you decide to sell your home within 9 years. See details aboutRecapture here.
If you move, but decide to keep your home and rent it out, you simply will not be able to take the credit any longer. You must live in the home as your primary residence to continue to take the credit.
TSAHC was created in 1994 as a self-sustaining nonprofit housing organization. At TSAHC we believe that every Texan deserves the opportunity to live in safe, decent and affordable housing. Our programs target the housing needs of low-income families and other underserved populations in Texas who do not have acceptable housing options through conventional financial channels. All TSAHC programs are offered statewide, with special attention given to rural areas and other select target areas.