Mortgage Credit Certificate

What Is A Mortgage Credit Certificate?

A Mortgage Credit Certificate (MCC) is a federal tax credit to assist homebuyers with moderate and low incomes. All home owners can claim an itemized deduction for mortgage interest. The MCC takes this a step further. An MCC "reduces your tax liability based on a percentage of the mortgage interest you pay." If you qualify for the
MCC, you can claim 20% of the interest you pay on your mortgage as a credit on your federal income taxes. You can save up to $2,000 on your taxes.

How Does It Work?

Suppose you qualify for an MCC and obtain a 30-year, 6.5% fixed-rate mortgage of $97,000. The first year's interest payment is approximately $6,273. The MCC allows you to take a federal income tax credit of $1,255 ($6,273 x 20%) for that year. If your federal income tax liability is $1,255 or more after you have taken all other
credits and deductions, you receive the entire benefit of the MCC tax credit - $1,255. In figuring your taxes, you also claim a deduction for the remaining 80% of your mortgage interest. If your federal income tax liability is less than $1,255 - $800, for example - your tax is reduced by only $800 that year. However, you can claim the remaining credit on tax returns for the next three years, if your tax
liability increases. You can receive an immediate benefit from your MCC tax credit by filing a revised W-4 (Employee's Withholding Allowance Certificate) with your employer. In this example, your federal tax would be reduced by $105 a month ($1,255 ? 12). The extra $105 increases your take-home pay and helps make your house payments affordable.

Who Qualifies For An MCC?

Qualification for an MCC is based on your income and the price of the home you are purchasing. Household income is defined as the "gross income of the mortgagor and any other person expected to live in the residence who is 18 years of age or older." The income and housing price limits differ in each county. MCC is only available to first time home buyers.

An MCC is a great tool to help you qualify for the amount of money that you deserve. It is important to remember that you should not use an MCC to qualify for more money than you are comfortable paying. Always use good judgememt when making all financial decisions especially when purchasing a home.

I hope everyone is doing very well this week getting ready for Thanksgiving.

Good luck and happy hunting!

- Michele Zelvis
919-632-2833
PrimeLending