| House Refinance Center |
| Mortgage Credit Certificate (MCC) Program |
| This Tax Gives You Money Each Year For As Long As You Own The House The Mortgage Credit Certificate (MCC) is a tax that keeps on giving, year after year. You get the picture. So why are homeowners not taking their lawful share? The $8,000 tax credit is gone. It served its purpose, and we had some activity in the housing market resulting in thousands of new homeowners. But the MCC is even better. It gives you money every year. Congress authorized the Mortgage Credit Certificate program in 1984. The Mortgage Credit Certificate (MCC) reduces the amount of federal income taxes you pay. Therefore, you have more money available to spend on a house. Remember this is a "tax credit" not a "tax deduction". A Tax deduction is subtracted from your adjusted gross income before you calculate the taxes you have pay. A tax credit allows you to subtract the credit from the total federal tax bill. HOW DOES IT WORK The IRS allows each homeowner to claim the interest paid each year on a mortgage. For example 20% of the annual interest will be a direct federal tax credit. This is a dollar for dollar reduction in the amount of federal taxes you have to pay. The remaining 80% continues to be an itemized deduction. Each state and local governments set their own rates and the rates range from 15% to 30%. EXAMPLE Let's say you have a mortgage of $300,000 at 5.0% interest.and 30 years fixed rate. The monthly payment is $1,610.46. The breakdown for the first year is interest payments $14,899.48, and $4,426.04 went towards the principal. With a MCC of 20%, you have $2,979.90 to be used. If $1,020.10. The remaining 80% of the mortgage interest can be use as an itemized tax deduction on your income tax return. One of the important features of the MCC is that any unused portion can be carried forward up to 3 years. States have different tax credit rates for the MCC. IMMEDIATE BENEFIT STRATEGY In order to get an immediate benefit, you have to file a revised withholding form with your employer. This is the W-4. If you are single with no dependents and make $42,000 a year, your federal taxes will be approximately $4,083 for 2010. If you are being paid every 2 weeks, the amount withheld will be about $160. Using the MCC tax credit and the revised W-4 only $46 will be deducted every pay period. You get an extra $114 intake home pay. ($2,979.90/26 pay periods). The MCC program doesn't assist with a downpayment. But it provides more take home pay for the homeowner. Thus, the mortgage payment is in effect smaller. HOW LONG DOES THE MCC LAST The MCC can be used each year. You must have the original mortgage, and you must continue to occupy the house as your primary there is a Federal Recapture Tax. In other words, your taxes will be re-assessed and you have to give back some of the money. You have to contact your state about the MCC. And within the state, there will be cities, towns and municipalities that have different rules and regulations. GENERAL REQUIREMENTS The house must be your principal residence. You must be a first time buyer, interpreted as,not owning a house in the last 3 years. The mortgage loan must be a new loan. The mortgage loan is a long term,fully amortized fixed interest rate such as a 20-,30- or 40-year term. Or a five, seven, or ten year adjustable rate mortgage. Negative amortization, balloon payment, or pay option Adjustable Rate Mortgages are not acceptable. The property must be a single-family house. If you are a first time home buyer, look into this program. It is for the long term and it will definitely help you get a house. For more information regarding tax consequences of the Mortgage Credit Certificate please go to the government website. http://www.irs.gov. prev: next: Home: |
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| Reissued Mortgage Credit Certificate Program (RMCC) The Reissued Mortgage Credit Certificate program is for current Mortgage Credit Certificate (MCC) holders who refinance their mortgages. The conditions for a reissue credit certificate are as follows.
Make sure that you have all your documents in place, because when you refinance, you will need every bit and piece of paper. Remember your are dealing with the government. But this program is worth the time and effort. prev: next: Home: |
| States That Offer MCC Program |
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