Home Buying 101: What is an MCC?

We previously covered many of the tax benefits for Florida homeowners in our Home Buying 101 series. Today, we'd like to discuss a lesser-known federal tax credit called the Mortgage Tax Credit Certificate, or MCC. Home Solutions Lenders Inc., a Highland Homes lender partner and Florida Housing-approved MCC lender, provides insight on just what the MCC is, who can benefit, and how to take advantage of this.

What is the MCC program and how can it benefit me?
The MCC program was designed to help make homeownership more affordable by reducing the impact of a monthly mortgage payment. The MCC is a certificate allowing qualified homeowners to claim a dollar-for-dollar tax credit. The credit received through an MCC reduces income tax liability, which frees up money which can be used towards your mortgage or other costs of homeownership.

Since the amount of the MCC credit can be counted as income when you apply for a mortgage, it also may help with qualifying for a mortgage for your dream home.

It is important to note the MCC does NOT actually lower your monthly mortgage payment. Instead, it is a tax credit claimed each year when you file your federal tax return with the IRS. The credit is capped at $2,000 annually, and any remaining mortgage interest paid that is not included as part of the MCC tax credit is eligible for the home mortgage interest deduction on your federal tax return. 

Put simply, each year you own your home and live in it as your primary residence, you may claim a dollar-for-dollar reduction of income taxes, which for most people equates to a tax return and cash to put towards your mortgage payments.

Who is eligible for the MCC?
The MCC is available to first-time homeowners, defined as those who have not owned a home within the past three years. Military veterans are exempted from the first-time buyer requirement. And, the home must be lived in as a primary residence.

There are income limits and purchase price limitations which vary based on the Florida county where your new home is being purchased. For 2020, household income limits range from $59,000 to $106,680 depending on the county and household size, while  purchase price limits vary from $253,809 to $415,058. To determine your eligibility, we recommend reaching out to a lender who specializes in the MCC program, such as Home Solution Lenders, Inc.

How do I receive the MCC?
The MCC is only available to new homeowners who apply prior to getting a mortgage and buying a home - it is not available to existing homeowners or after closing on your home. Get more information on the MCC program and obtaining a certificate by connecting with an MCC program-approved lender. It is also important to note the MCC program requires the completion of a first-time homebuyer education class, and has a $450 participation fee.

Your Mortgage Credit Certificate will show the certificate credit rate that you use to figure your mortgage interest credit. Each year when you file your federal income taxes, you’ll input this information and complete Form 8396 to claim your tax credit. Another benefit to note is the MCC is available whether you itemize your tax return or take the standard deduction. For additional questions on filing Form 8396 or your federal income taxes, we recommend consulting with a tax professional.

What else should I know about the MCC program?
If you refinance your mortgage, pay off your home loan, or no longer live in the home as your primary residence, you will lose the MCC tax credit. In addition, if you sell the home within the first nine years of obtaining the mortgage with the tax credit and make a profit on the home sale, you may be required to pay back some or all of the credit you received. So, this program has the most value for those who are planning to live in their new home for the long-term.

For more details on the MCC program, whether you qualify, and how it can benefit you, connect with an MCC approved lender such as Home Solution Lenders, Inc. They’ll be able to determine your eligibility, help you obtain your certificate, and finance the new home of your dreams.

Highland Homes builds new homes in Tampa Bay, Metro Orlando, Ocala, Sarasota-Bradenton, and Lakeland-Winter-Haven with pricing from the $180's to $300's. For more information about building your dream home, browse our Florida new homes online, and call or email us to connect with a Florida New Home Specialist!

For informational purposes only and not a guarantee of rates, terms, or program availability.