In honor of National Homeownership Month, TSAHC is doing a blog series this June highlighting our homeownership programs. In this week's blog, we are featuring the Mortgage Credit Certificate (MCC) program.
What is a Mortgage Credit Certificate?
Established by Congress as part of the Deficit Reduction Act of 1984, the Mortgage Credit Certificate is a dollar-for-dollar federal income tax credit equal to a percentage of the interest a homeowner pays on their mortgage loan. Homeowners with an MCC can take an annual tax credit of up to $2,000.
How does it work?
Check out the chart for an example of how MCC works and the explanation below (we apologize, but it requires some math).
In the example above, you have a $120,000 mortgage with an interest rate of 4.75% and an MCC rate of 40%. Your interest would be $5,700 in the first year. 40% (MCC rate) of that interest is $2,280, but since the tax credit is capped at $2,000, that is the credit you would receive. However, you can carry over that additional $280 to use in the next three years.
Homeowners can take an MCC credit on their income taxes every year they occupy the home as their principal residence which means it has the potential to save home buyers thousands over the life of a loan.
Who is eligible?
TSAHC's MCC Program serves the same populations eligible for down payment assistance through our Homes for Texas Heroes and Home Sweet Texas Home Loan Programs. Additionally, MCC can be combined with our down payment assistance.
However, only first-time home buyers or individuals who have not owned a home in the last three years are eligible for an MCC. Veterans are exempt from the first-time home buyer requirement. To receive an MCC, home buyers must apply for the MCC program when they are purchasing the home.
Ready to Leap into Homeownership?
As a reminder, TSAHC is offering webinars every Wednesday in June to help Texas families and individuals navigate the home buying process. We encourage you to sign up for one today to learn the 10 steps to buying a home and find out more about our home buyer programs.
On the House blog posts are meant to provide general information on various housing-related issues, research and programs. We are not liable for any errors or inaccuracies in the information provided by blog sources. Furthermore, this blog is not legal advice and should not be used as a substitute for legal advice from a licensed professional attorney.