Notice of Issuance of Mortgage Credit Certificates
For current MCC and the G-I Home Credit Program information, please click here.
Program Highlights: The federal government allows each homeowner to claim an itemized income tax deduction for the amount of interest paid each year on a mortgage loan. The Mortgage Credit Certificate enhances this benefit. Homeowners with a MCC are allowed to use 20% of their annual mortgage interest as direct federal tax credit, resulting in a dollar for dollar reduction of their annual federal income tax liability. The remaining 80% of their annual mortgage interest will continue to qualify as an itemized tax deduction. Here is an example of how MCC’s work:
ASSUMPTIONS
Annual Income $45,000
Loan Amount $150,000
Interest Rate 6.50%
MCC Credit Rate 20.00%
Deductible Interest with MCC $7,761
Income Taxes Due without Mortgage Deduction $6,750
INCOME TAXES DUE
Without a MCC With a MCC
Income $45,000 $45,000
Mortgage Interest Deduction $9,701 $7,761
Taxable Income $35,299 $37,239
Taxes Paid @ 15% Tax Bracket $5,295 $5,586
MCC Tax Credit $0 $1,940
Income Taxes Due $5,295 $3,646
Tax Savings Due to MCC $0 $1,649
In the above example, this household save $1,649 in the first year. Assuming they lived in the home for 30 years, they would save over $38,000.
Under the MCC program qualified homebuyers can receive their benefit in two ways:
- Wait until they file their yearly tax return or
- Take an immediate benefit. This is done by filing a revised withholding form with their employers to reduce the amount of federal taxes from their wages. In the above example that would increase take home pay by $137 a month ($1649 divided by 12).
The buyer can use the Mortgage Credit for up to 30 years as long as they live in the home as their primary residence. If they refinance, the MCC can be re-issued by contacting IHDA.
A list of current participating communities can be found by clicking here
What Are The Requirements For The MCC Program?
- The borrower and their spouse must be first time homebuyers. A first time homebuyer is defined as someone who hasn’t had an ownership interest in a primary residence within the last three years. Borrowers buying in IHDA targeted areas are exempt from the first time homebuyer requirement. A list of targeted areas can be found by clicking here . Additionally veterans and their spouses are exempt from the first time homebuyer requirement. However for a veteran’s spouse to qualify, the qualifying veteran must be living at the time of application.
- The mortgage loan must be a new mortgage loan. The MCC cannot be used for an existing mortgage loan.
- The household must meet certain income limits and the property must meet purchase price limits. These limits are determined by the county in which they are purchasing their home.
- MCC's can only be used for one and two unit properites only.
Click here for all Targeted & Non-Targeted Area Income & Purchase Price Limits
What Are The Loan Terms?
The tax credit may be used in conjunction with any loan product the participating lender offers, except any loan product that is financed with proceeds from tax exempt financing such as IHDA’s I-loan programs. Therefore, borrowers have flexibility in the loan product that they choose.
Program Fees
Total MCC fees are $500, of which $150 is payable to the originating lender, and $350 is payable to IHDA.
Participating Lenders:
Participating lenders can be found by clicking here