How much would you like to save up to $2,000 a year in your taxes for the life of your mortgage? I hope you answered, “a lot! This, in short, is what the Mortgage Credit Certificate (MCC Tax Credit) enables you to do each year.
We’ve talked extensively about the MCC Tax credit in the past; however, today, we’re going to look at exactly what you need to do to claim the certification if you qualify as of this year (2021.)
What is the MCC Tax Credit?
The mortgage credit certificate allows you (a homeowner) to claim a federal income tax credit that is worth up to $2,000 per year for the life of the mortgage. You need to be a first-time buyer that qualifies under your state’s program. However, not all states issue this program, though they might have others available. One final detail - in order to get any tax benefit, you must claim the mortgage interest credit on your federal tax return every single year you own the home.
How does the MCC Tax Credit Work?
The MCC Tax Credit allows you to use a Mortgage Credit Certificate (MCC) to claim a free federal tax credit - the mortgage interest credit. This credit is given by your state’s Housing Finance Authority (HFA) as part of their mortgage credit certificate program. It enables you to claim up to $2000 of your mortgage payments a year as a tax credit - directly lowering what you owe in federal taxes.
By lowering your taxes, it also saves you money on your home. In fact, it can save you up to $60,000 on your home over the course of the loan. However, if you don’t owe a ton of federal income taxes, then this credit might not help you by the full $2,000. In addition, you’ll also need to qualify for the credit first.
How to Qualify for the MCC Tax Credit
This varies greatly by the state where you plan to buy your first home. However, there are a few things that are typical for the qualification:
Keep in mind, certain states have additional qualifications as well as some caveats which can allow people who have owned a home in the past to qualify. Examples include people who haven’t owned a home in a set number of years of the active military.
How to Obtain & Claim the MCC Tax Credit?
Assuming that you qualify and that your state has a program, then you will apply when you take out a loan. However, you must go through a participating lender that’s been approved by your state’s Housing Finance Authority.
However, it’s important to remember that you must claim this certification on your taxes at the end of the year. Just because you obtain it, doesn’t mean it’s being used. That’s one reason it’s important to find an accountant who is familiar with the MCC and knows how to apply it (like us.)
A Few Notes About the MCC Tax Credit
While it seems like a no-brainer, there are a few things to think about in regards to getting this certificate and using it each year.
If this sounds like something you’re interested in, then you can learn more about the MCC Tax Credit on our blog and FAQs. If you’re looking for an accountant that is familiar with the credit, contact us, and we’ll get started with your taxes.
11/11/2022 04:01:02 pm
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Randy Tarpey CPA