If you’re purchasing your first home, you’re probably on the hunt for first-time homebuyer programs. First of all, congratulations! This is an exciting time in your life, and the last thing you want is for the home-buying process to stress you out. But doesn’t the ultimate stress always seem to revolve around money?! That’s why we want to show you how first-time homeowners can save up to $2,000 per year with the Mortgage Credit Certificate (MCC) program.
Are You a "First-Time Homebuyer?"
We need to clarify the term “first-time homebuyer” because it’s not as simple as it sounds. If you’re genuinely buying your first home ever, then, yes, you fall into this definition. Luckily, when dealing with the Mortgage Credit Certificate Program, a few other parties can benefit from this first-time homebuyer program. Let’s look at how the government defines this term:
How to Save up to $2,000 Each Year
Now that you can benefit from the MCC’s first-time homebuyer program let’s look at how it works. As mentioned above, this is a federal program that each state manages individually. Keep in mind that some areas might offer higher benefits than others.
A Percentage of Your Mortgage Interest
To determine your benefit, the MCC program uses a percentage of the interest you pay on your mortgage as a first-time homeowner. Again, each state differs, but, in general, you can earn back anywhere from 10% to 50% of the interest you pay on your mortgage.
Let’s look at an example. Imagine that you have a $100,000 home loan with 3% interest. In your first year, that means you’ll pay $2,876 in interest. If your state offers a 50% MCC benefit, then you can claim half of that back on your taxes, meaning you’d receive $1,438 in tax credits.
A $2,000 Maximum
Note that the example above doesn’t hit $2,000. So although you can earn up to $2,000 per year, not everyone will receive that amount. On the contrary, some first-time homeowners will pay more in interest, and 50% might be more than $2,000. But, the benefit of the MCC cannot exceed $2,000 per year. Still, if you can qualify for the full amount, with a 30-year mortgage, you’re looking at $60,000 of savings!
Filing Your Taxes
So, how do you claim the benefits of this first-time homebuyer program? When you file your annual taxes, use Form 8396 to get your MCC tax credit. As a non-refundable tax credit, the MCC program can confuse those who don’t owe much tax. Don’t worry; you don’t have to manage this process on your own! If you ever need any assistance, our CPA firm is happy to help!