A mortgage credit certificate helps eligible homeowners save on their taxes through a tax credit they can claim for a portion of their mortgage interest payments — up to $2,000 every year. Learn more about mortgage credit certificates, including eligibility requirements and how to claim this valuable tax break.
A mortgage credit certificate (MCC) provides a dollar-for-dollar tax bill reduction, and was created to make homeownership more affordable for low-income families. MCC programs are run by state and local housing finance agencies and are only available to homeowners who fall under specific income limits. Income guidelines can vary by program, location and family size.
You can qualify for a mortgage credit certificate program whether you have a conventional or government-backed mortgage , including VA loans and FHA loans . Unlike some other tax breaks for homeowners, an MCC works even if you take the standard deduction. The credit is typically only for single-family homes, condominiums and manufactured homes — not multifamily properties .
To estimate your MCC credit, you’ll need to know your mortgage amount, interest rate and MCC percentage, which usually ranges from 10% to 50%.
Let’s say you have a $300,000 mortgage with a 5% interest rate. During the year, you make $15,000 in interest payments. Assuming your program offers a 20% MCC percentage, you’ll receive a $3,000 tax credit ($15,000 x 20%).
Home purchase slider:
Generally, low-income, first-time homebuyers are eligible for a mortgage credit certificate, though requirements vary by program. Homeowners typically must earn less than the area median income and live in the home as their primary residence to qualify for an MCC.
Additional requirements to qualify for an MCC may include:
→ Buying a home within the program’s price and area limits. In some cases, your MCC eligibility will depend on your home’s location and purchase price. Check with your state’s housing finance agency to learn more about the specific requirements in your area.
→ Living in your home for a set period of time. If you sell your home within the first nine years, you may have to repay a portion of your MCC — this is known as a recapture tax.
→ Paying the MCC program fee. Most MCC programs charge issuance or processing fees. This amount varies by program and mortgage lender and can range from $0 to several hundred dollars.
If you think a mortgage credit certificate is right for you, here’s how to get one:
Ready to compare refinance offers? Get Your Best Rates from Top Lenders Today
Mortgage credit certificate costs vary by the issuing agency. For example, the Michigan State Housing Development Authority charges $400 to get an MCC, and the North Carolina Housing Finance Agency charges a $475 MCC processing fee. Your lender may impose additional fees. Contact your local housing finance agency to learn more about the costs you can expect.
You can claim the credit annually, and there’s no lifetime cap.
You typically must pay a fee to the issuing agency.
Whether an MCC is worth it depends on several factors, including how long you plan to live in your home. Selling your home before the nine-year mark can result in needing to repay a portion of the tax credit. The bottom line? An MCC is a great way for eligible homeowners to reduce their tax bill, as long as they understand the limitations and drawbacks.
Yes, you can lose your mortgage credit certificate if you refinance your mortgage. However, you can apply for a reissued mortgage credit certificate (RMCC), which may allow you to maintain your MCC.
Your mortgage credit certificate number is on your original MCC form. If you need a copy of your certificate, contact your lender.
Yes, you can get a mortgage credit certificate with bad credit. Since an MCC is a federal tax credit and not a loan, your credit score doesn’t affect your eligibility.
Yes, you can still qualify for the mortgage credit certificate if you take the standard deduction on your tax return. This differentiates it from other tax breaks for homeowners , including the mortgage interest and property tax deductions, which are only available to those who itemize their taxes.
