Buy A House And Get Paid?

You probably have never heard of Mortgage Credit Certificates (MCC) before, most real estate professionals don’t even know about it. It’s THE best kept secret, and now everyone will know!

This program was built to help first-time homebuyers qualify for mortgages thay might not have qualified for. By reducing the amount of federal income tax you pay, the Mortgage Credit Certificate (MCC) gives you more available income to qualify for a mortgage loan and assist you with house payments. Now that increase in your take-home pay can be incorporated into your mortgage application!

It is a tax industry standard that the IRS allows homeowners to reduce the taxable income for the mortgage interest paid annually.. But for a homeowner with a MCC, they’re allowed to deduct 20% of their annual mortgage interest directly from their tax liability, resulting in a dollar-for-dollar reduction in taxes owed. Is this becoming too much too fast. I have found that sometimes it’s best to let the numbers tell the story.

Loan Amount : $250,000

Interest Rate: 6%

Payment: $1,499

Now in the first year, you will pay a total of $14,916 in interest on your mortgage. Those numbers don’t change if you have a MCC or not. Now let’s assume you have a MCC.

You paid $14,916 in total mortgage interest. At 20%, that number equates to $2,983.00. That means if you would normally owe the IRS, let’s say, $4,297 that year, you would now owe $1,314 ($4,297-2,983) instead ! The MCC tax credit will reduce the tax liability owed to the IRS dollar-for-dollar.. The remaining mortgage interest is listed as an itemized deduction on the Schedule A.. The MCC credit is not a refundable credit, so if your tax liability is less than the credit, the difference will not be refunded to you.. I know, I know, wouldn’t that be nice. Unused MCC tax credit can be used to offset future tax liability..

You can wait for your annual tax return if you want, but if you have a MCC, you might as well take full advantage and receive more immediate benefits, right? It calculates into a monthly savings of $249.? Homeowners with a MCC can file a revised W-4 withholding form with their employer to reduce the amount of federal income tax withheld from their wages, which increases their take-home pay.

Most readers, right now, are wishing they heard of this MCC thing years ago. It must be new right? Wrong. The Mortgage Credit Certificate Program was authorized by Congress in the 1984 Tax Reform Act as a means of providing housing assistance to families of low and moderate income. The Mortgage Certficate Credit program sets income and purchase restrictions for the homebuyer, in addition to other federal guidelines which must be met in order to qualify for the credit..

Each real estate transaction is subject to the guidelines set by the program.. This program is typically for first-time homeowners, or those who have not had ownership interest in a principal residence at any time in the last 3 years. To qualify for this MCC tax credit, it must be your primary residence.. If the homeowner has refinanced, the homeowner will not qualify for the MCC.. Mortgage Credit Certificate tax credit is a subsidy, and a tax payer may have to recapture th tax if you sell the home or exceed the specified income limit.. I recommend soliciting advice from a tax professional if you fee the calculations are too difficult for your particular situation. But for the curious, more tax information can be found at http://www.irs.gov/pub/irs-pdf/p17.pdf on page 259.

This is a great program, plain and simple. So whether or not you need the credit to qualify for a home purchase, you should still investigate within your area to find out what the guidelines are. The best place to look is at your local Housing and Finance departments within your state’s government. Along with the forms you’ll need, they will also have a list of participating lenders. Always research the mortgasge professionals in your area and ask about the MCC program. Better still, go to http://loangoose.com and request more information today!