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The Mortgage Credit Certificate Program 

How First-Time Homebuyers Can Save Up To $2,000 Per Year

10/29/2020

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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:
  • First-Time Homebuyers
    • The federal government established the Mortgage Credit Certificate program, but each state regulates the benefits individually. Overall, the purpose of the MCC is to provide monetary assistance and relief to “first-time homebuyers” — individuals who are purchasing their very first residence. 
Now, if you’ve already purchased your first home, unfortunately, you’re most likely out of the running and can’t benefit from the MCC. However, there are some exceptions and other parties that fall into this category.
  • “New” Homebuyers
    • The Housing Finance Agency (HFA) defines a “new” homebuyer a little differently than a first-time homeowner. If you bought your first home awhile ago and haven’t owned a residence in the past three years, you can still qualify for the Mortgage Credit Certificate program.

  • Homebuyers in Targeted Areas
    • Some homes are exempt from this definition, but only if they’re in rural or impoverished regions requiring a housing boost. Additionally, the Department of Housing and Urban Development (HUD) must officially designate these areas. You can still take advantage of the MCC program when buying a home in these targeted areas, even if you’ve already purchased a home in the past.

  • Active Military and Veteran Homebuyers 
    • Lastly, active military and veterans can always enjoy the MCC program’s benefits even if they already purchased a home.

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!
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    Randy Tarpey CPA

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