Posts Tagged ‘mortage credit certificate’

Mortgage Credit Certificate (MCC) Program

February 1, 2010

Home ownership is a great source of pride and personal satisfaction.  At Awareness Home Funding we enjoy helping our clients reach this goal.  And with the Mortgage Credit Certificate (MCC) program, we have another tool to assist you. 

The MCC program is a Federal tax credit on the mortgage interest you pay on your home loan over a calendar year.  While this does not reduce your monthly mortgage payment, it is a dollar for dollar reduction from the amount of your Federal Income Tax liability.  To date, for the five states we conduct business, only Michigan and Indiana have this program.  (Kansas does not have this program and Florida stopped the program due to lack of funding.)

The beauty of the program is that it effectively reduces your annual interest rate. 

For example: In Michigan the program offers a full 20% tax credit on the amount of annual interest paid.  On a $100,000 mortgage at 6% interest, the approximate annual interest amount is $6,000 for the first year.  At the full 20% tax credit, $1,200 can be deducted from the amount of Federal Income Tax you owe.  ($6,000 x 20% = $1,200; making your effective interest rate 4.8%) 

The MCC credit remains in effect as long as your home continues to be your principle residence and the original mortgage remains in place.  If you refinance your home loan, sell your home, or purchase a new home as your primary residence, the credit program will end.  For most homeowners who participate in this program, there really is no need to even consider a refinance since their effective rate is already reduced.

 The benefits of this program are significant! 

  • In many areas of Michigan and Indiana, you do not need to be a first time homebuyer to qualify.
  • In Michigan, up to 20% of your mortgage interest can be credited on your Federal tax return.  Plus, the remaining 80% of mortgage interest paid will continue to qualify as an itemized deduction on your Federal tax return. 
  • In Indiana, 20-35% of your mortgage interest can be credited on your Federal tax return dependant upon the size of your mortgage loan amount.  Again, the remaining 65-80% of interest paid will qualify as an itemized deduction on your Federal tax return.
  • Since the MCC is applied after all other credits are subtracted, any unused portion may be carried forward against future Federal Tax returns for up to 3 years.  (See your tax advisor for specific federal credit criteria.)
  • The program is effective for the life of the original mortgage.
  • The program may also be applied to individuals with current non-taxed income, but who have the potential for taxable income in the future.
  • Most mortgage loan programs apply.

Talk to one of our Home Loan Specialists today for how this program can work for you!