State Spotlight: The Arizona Mortgage Credit Certificate (MCC)

If you are a first-time home buyer in the state of Arizona, or have not owned a home in the last three years, you might qualify for the Mortgage Credit Certificate program. In short, the MCC tax credit allows you to receive a tax credit of 40% of your annual mortgage interest, up to $2000 annually, for as long as you live in your purchased home.

In order to help you better understand how the program works in Arizona, we've looked at your program's lead - the Pima Industrial Development Authority (IDA).
 
Qualifying for the MCC Tax Credit in Arizona      
The program requirements you need to meet in order to be eligible for a Mortgage Credit Certificate in Arizona are as follows:

• You are a first-time homebuyer or have not owned a home in the last three years
  • Qualified military veterans do not need to by first time home buyers
  • Home buyers who purchase in targeted areas do not have to be first time home buyers
• You must apply for the MCC program and be approved prior to closing on your home
• All home types are accepted: single-family, town homes, condos, duplexes, or manufactured homes
• All properties in Arizona are valid except those in Maricopa County
• You must be occupying the property being purchased

 
Additionally, there are household income limits and purchase price limits that vary by county. Individuals can find more information here or talk to their lender.
 
How Does the MCC Mortgage Credit Certificate Arizona Work?
While each state runs its own version of the program, there are similarities between many states, and Arizona is no exception. In Arizona, participants in the MCC Tax Credit program are able to reduce the amount of federal income taxes they owe each year by a predetermined percentage (40%) of their paid mortgage interest (up to $2000).

Homeowners are also responsible for a one-time program fee of $500, and an annual administrative fee of $100. These fees ensure borrowers who obtain the MCC credit are serviced for the life of their loan, along with covering administrative and reporting costs.

Individuals should work with a tax professional to discuss their options for obtaining the MCC tax credit, as there are different requirements for using the program if your loan is refinanced or if you sell your home within 9 years.
 
How Much Can A Qualified Homebuyer Save?
In Arizona, the mortgage credit rate percentage is 40%, or up to $2000 annually. For example, if you purchase a home for $125,000 with a 4% interest rate, you’d pay $5000 in interest your first year. $5000 x 40% MCC Credit = $2000 Tax Credit.

 
Other Programs Available to Homebuyers in Arizona
In addition to the MCC Mortgage Credit Certificate program, Arizona also offers Pima Tuscon Homebuyer’s Solution (PTHS) and the HOME Downpayment Assistance programs that can be used in conjunction with the MCC. Combining these programs can save you money on the initial down payment of your home, along with reducing your federal income tax liability. Work with your tax professional and lender to determine the best programs for you.