11-24-10 Mortgage Credit Certificate, a first-time homebuyer's assistance tax credit

Mortgage Credit Certificate, a first-time homebuyer’s assistance tax credit

Good news! The Mortgage Credit Certificate (MCC) Program is back. This is a great first time homebuyer assistance tool that allows a state or local governmental unit or agency to issue mortgage credit certificates to taxpayers in connection with the acquisition, qualified rehabilitation, or qualified home improvement of their principal residence located in the jurisdiction of the governmental unit that issued the certificate.

The holder of a MCC uses it to reduce the homebuyer’s annual Federal tax liability as long as they keep the loan and continue to occupy the home as their principal residence. Note that the credit is a dollar for dollar reduction of taxes. Any amount of credit not used by the homebuyer in the current tax year may be carried forward into the next 3 years, or until the credit is used.

Under the MCC Program, there are some requirements to be met:

1. Be a first time homebuyer, which is defined as not having owned a home in the past three years. This requirement is waived if the property is located in a Target Area that is identified by the credit rules.

2. Annual household income must be at or below the amounts allowed based on family size. These are:

1 – 2 Persons $70,000
3 or more persons $80,500

3. Be a single-family residence that can be reasonably expected to become the principal residence of the mortgagor within a reasonable time after the financing is provided.

4. Must be owner occupied during the life of the loan.

5. Be located in the jurisdiction of the authority issuing the certificate.

The MCC is a federal tax credit, not a loan, offered to the homebuyer who chooses the lender from a list of participating lenders who have completed the required MCC Training Course.

The MCC Program has a recapture tax provision when the property is sold within the first nine years of ownership. The tax depends on the homebuyer’s adjusted gross income for the year of the sale.

If you have any questions on this, please do not hesitate to contact us.
 


 
 
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