MORTGAGE CREDIT CERTIFICATE ELIGIBILITY REQUIREMENTS
To be eligible, you must meet these three criteria:
1. First-Time Homebuyer
- Those who have NOT owned a Principal residences within the past three years.
- You must live in the house you are buying.
2. Income Limit (There are target and non-target areas*)
Size of Household Maximum Income
1-2 person(s)
3 or more
|
15% Tax Credit
Non-Target Area
$88,800
$103,132
|
15% Tax Credit
Non-Target Area*
$88,800
$103,132
|
3. Purchase Price
New
Existing
|
Non-Target Area
$591,272
$571,278
|
Non-Target Area*
$722,665
$698,229
|
*See IRS Census Tract List
Here's an example of how a MCC can make buying a home affordable for you:
You obtain a mortgage loan of $175,000 at 5.25% for 30 years with monthly payments of $966 and a MCC credit rate of 15%.
In the first year, you pay a total of $9,187 of interest on your mortgage loan. Because you have a MCC, you could receive a federal income tax credit of $1,378 (15% of $9,187). If your income tax liability is $1,378 or greater, your will receive the full benefit of the MCC tax credit. If the amount of your tax credit exceeds the amount of your tax liability, the unused portion can be carried forward (up to three years) to offset future income tax liability.
The remaining 85% of mortgage interest, or $7,809, qualifies as an itemized income tax deduction.
To receive the immediate benefit of your MCC tax credit, you would file a revised W-4 withholding form with your employer to reduce the amount of federal income tax withheld from your wages and increase your take home pay by $114 per month ($1,378 divided by 12).
By applying the increase in your take home pay of $114 towards your monthly mortgage payment of $966, your effective monthly payment would be $852, ($966 minus $114).