MCC Program: Frequently Asked Questions

Are you a first-time homebuyer wondering about the MCC program? Perhaps you’re interested in using it, but you’re not sure if you qualify. Maybe you love the idea of saving money on your home, but you don’t know how the MCC tax credit works. 

Well, you’re in luck! As a CPA, I specialize in the MCC program, and I’m here to answer your FAQs. I’ve compiled the five most common questions I get about the program and will answer them here in this blog post. If you have further questions (or I missed anything), please don’t hesitate to contact me. My team and I work with homebuyers from across the United States.

The Most Common MCC Program FAQs

A lot of people contact me asking the same questions. I have an FAQ page on my website, but sometimes it’s helpful to address the most common of the bunch. If you’re curious about how the MCC program works and if you qualify, then this post is for you.

FAQ #1: What’s the Purpose of the MCC Program?

Let’s start with the basics. The MCC Program benefits first-time homebuyers by giving them an annual non-refundable tax credit. If you’re buying your first home, then you don’t have any capital from a previous property to help you afford it. You’re starting at the very beginning, which can be financially challenging for many. 

To help you buy your first home, the federal government created the MCC program. This program gives you an annual tax credit based on how much interest you paid on your mortgage. The maximum credit is $2,000 per year. So for a 30-year loan, that’s a significant savings of $60,000.

FAQ #2: What Does ‘MCC’ Mean?

‘MCC’ stands for Mortgage Credit Certificate. To receive the MCC program’s tax credit, you must obtain a certificate before buying your home. Both your realtor and your loan officer can help you with this, but be sure to tell them that you want to use the MCC program. Not all realtors or banks understand the process, so choose someone who will be on your side. And, again, you can always ask us for help!

FAQ #3: How Do I Qualify for the MCC Tax Credit? ​

The MCC Program is a tax incentive for first-time homebuyers, helping them make such a big purchase for the first time. But you don’t necessarily have to be a “first-time” homebuyer to get the benefit. There are four ways you can qualify for the program:

• You’re a First-Time Homebuyer: Of course, if you are, indeed, buying your very first home ever, then you are a prime candidate. You are precisely who the program wants to help!
  
  
• You Haven’t Owned a House in Three or More Years: The Housing Finance Agency (HFA) defines a “first-time homebuyer” as someone buying their very first home or someone who’s buying a home for the first time in three or more years. Some maybe you owned a house five years ago, but you sold it at that time, or it foreclosed. You can still benefit from the MCC tax credit, as enough time has passed since that ownership.
  
  
• You’re Buying a Home in a Designated Area: The Department of Housing and Urban Development (HUD) designates certain areas as “target areas.” These are typically city neighborhoods or rural districts in need of a housing boost. Even if you aren’t a “first-time” homebuyer, you can still use the MCC tax credit if you buy in one of these designated areas.
  
  
• You’re Active Military or a Veteran: Whether it’s your first, second, or third home, you can always benefit from the MCC Program if you are a veteran or currently active in the military. Some individual states (like Texas, for example) extend that exception to other public servants, including teachers, firefighters, police officers, emergency service workers, etc.

FAQ #4: How Much Money Can I Get with the MCC?

That credit varies from person-to-person, as a few factors determine the final amount:

• Where you live
• The amount of your home mortgage
• The annual interest you pay on your mortgage

You can calculate the amount of credit once you obtain your MCC certificate. On that certificate, you’ll receive an assigned tax credit percentage. This percentage will vary depending on the factors listed above. In general, however, the rate ranges from 10%-50%. 

Once you know this figure, you can calculate your tax credit benefit by using the following formula:

Annual Interest Paid on Mortgage ($) x MCC Program Assigned Percentage (%)

Let’s look at a simple example. Let’s say you have a mortgage loan of $100,000 and an interest rate of 5%. That means the annual interest you’ll pay on your first year is $5,000 (5% x $100,000). Now, let’s say your assigned MCC percentage is 30%. That means you’ll receive an annual tax credit of $1,500 (30% x $5,000).

As a non-refundable tax credit, you can apply that $1,500 towards your annual taxes. If you owe less than $1,500, you won’t receive a refund for the remaining amount (non-refundable). And if you anticipate a higher tax year in the future, you can always roll your credit forward.

FAQ #5: Are There Any Limits on How Much I Can Spend on a House?

Yes, there are two limits you’ll need to consider for the MCC Program: house price limits and annual income limits. These restrictions vary depending on where you live within your state. To determine yours, simply look up the MCC Program in your state or county.

House Price Limits: Each county will determine this limit individually, but in general, the limits are quite generous. The purpose of the program is to help first-time homebuyers and stimulate the housing market. Therefore, plenty of houses fall into the pricing limits.

For example, we call Blair County in Pennsylvania home. Here, the house you purchase cannot exceed $346,300 if you want to use the MCC Program. As a more impoverished county in the state, this is quite a high figure. The program allows both lower-income and middle-class people to benefit.

Income Limits: Again, these limits vary from county-to-county. I’ll use Blair County as another example. Here, if you want to use the MCC Program and purchase a 1-2 bedroom home, your annual income cannot exceed $92,200. For a 3+ bedroom home, that yearly income limit increases to $107,600.

Be Proactive And Save Money on Your Future Home

The above questions are the most common I receive, but if you have more questions, you can read our FAQ page, browse our blog posts, or contact us. The general rule of thumb with the MCC Program is to be proactive. Ask us questions, talk to your realtor, and discuss opportunities with your home loan officer or financial advisor. The MCC tax credit is just one benefit for homebuyers, but it’s a good one and an excellent place to start. ​