The Mortgage Credit Certificate program provides a tax incentive for first time home buyers. You will get up to $2,000 federal tax credit as long as you have the mortgage. This program was created through legislation as part of the 1984 Tax Reform Act. The program seeks to help lower and middle income families who have not owned a home for the past three years.
The Basics of Mortgage Credit Certificate
To get the incentive, you need to live in a state where the program is available. It is very simple to take the credit. Simply apply for it whenever you take out a housing loan. In most areas, the credit you can enjoy is 20 percent of the mortgage interest you paid. The maximum allowable credit is $2,000 annually.
Take note that the credit is not a deduction. You should subtract the full $2,000 from your tax bill. If your obligation is less than the amount of the maximum credit, the difference is non-refundable.
It is not difficult to qualify for the Mortgage Credit Certificate. Income and home prices limits are generous. It is really beneficial for middle class families.
Availability of the Program
It is quite obvious that this program is relatively obscure. This is due to the fact that not all states are offering the credit. This program operates on a state or local level. Some states that offer the program provide limited funding. There are also states that offer credit on a limited time only. So the availability of the program is not universal. You need to know if your state can offer tax credit for you.
The program stipulates that your home should be your primary residence in order to receive the credit. In case you sell your home after owning it less than nine years, you will be liable for a recapture. So it is advisable to fully understand the conditions of the program before you apply for it.
There is also a wide disparity on the rules of qualifications. Each state has its own rules for the program. A county or a municipality could also have different rules of qualifications. The size of the credit also varies. 20 percent is quite common but some states may offer different percentages. However, the $2,000 maximum credit is applicable nationwide.
For states offering the credit, their housing agencies are responsible for administering the program. If you want to know more about the program, you need to contact the local housing authorities because you may not get much information from national agencies.
You can apply for the program through your mortgage lender. Take note though that not all lenders are authorized to offer the program. You must research if the program is available in your area and if the lender is authorized to offer it.
The Mortgage Credit Certificate is perfect if you plan to stay in your home for a decade. Those who expect to live in their homes for only a few years can not enjoy the benefits of the program. You should also determine if the credit is being offered in your state.
Rob K. Blake, mortgage expert and author, educates mortgage shoppers on finding local providers by state like Arkansas Mortgage Brokers and Lenders and provides reviews of national companies like Asset Acceptance Capital Corp.
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