GET 20% OF THE INTEREST YOU PAY BACK EVERY YEAR FOR THE NEXT 30 YEARS.
This Tax credit is better than the 1st tax credit offered by the government.
First Time Home Buyers can still qualify for an amazing Tax Credit that the Government has been offering for a very long time. This tax credit give the Home Owner 20% of the interest he or she pays on the loan back every year.
Some of my clients get confused between a credit and a deductions. Every home owner is able to deduct the interest they pay on their home from their income every year. The tax credit is a credit the home ower gets every year. I have explained more in detail below.
Advantages and Benefits of a Tax Credit
- The Tax Credit reduces the homebuyers federal income tax liability, increasing the amount of disposable income available to purchase a home.
- The Tax Credit has the potential of savings the MCC holder thousands of dollars over the life of the loan.
- Home buyer can claim the Tax Credit for as long as they occupy they home purchased as their primary residence and pay interest on the mortgage loan
- The Tax Credit can be used with almost any type of mortgage, including adjustable rate mortgages. However, it cannot be used with the tax-exempt bond programs.
- The program provides homebuyers with the opportunity to buy a home by keeping more money in their pockets each month.
What is the Difference between a Tax Credit and a Tax Deduction?
- A mortgage interest deduction differs from a mortgage tax credit in a number of ways. For example, all homebuyers, regardless of income, may take a mortgage interest deduction, whereas mortgage tax credits are available only to holders of Mortgage Credit Certificate.
- A tax deduction or a tax-deductible expense affects a taxpayer's income tax. A tax deduction represents an expense incurred by a taxpayer. They are variable amounts that you can subtract, or deduct, from gross income when the taxpayer computes his or her income taxes. As a result, the tax deduction will lower overall taxable income and thus lower the amount of tax paid.
- A tax credit is a similar concept, but is different in that it reduces the tax owed, rather than reducing taxable income. This amount of tax savings is not dependent on the rate the taxpayer pays.
- An MCC provides a tax credit, based on a percentage (as determined by the Program guidelines) of the mortgage interest paid annually. The remaining mortgage interest paid annually may still be taken as a tax deduction when the taxpayer computers his or her income taxes.
How to qualify for the Tax Credit
Not every Lender can offer this Tax Credit. Megastar Financial is an approved lender that can offer this tax credit to qualified borrowers. In order to qualify for an MCC program you must meet the following requirements, which are established by Internal Revenue Service (IRS) regulations for MCC programs:
- Purchase a home within the Eligible Loan area.
- Be an Eligible Borrower, as published in the individual MCC Program Fact Sheet.
- Be a first-time homebuyer or have not have ownership interest in a home as a principal residence, during the last three years. Even if you are not a first-time homebuyer, you may be able to use the MCC program if you are purchasing a home located in a federally designated Targeted Area.
- Annual household income must not exceed the maximum allowed income limits for the county in which the home is located.
- The home’s purchase price must not exceed the maximum allowed purchase price limits.
- Must be purchasing a home and obtaining an Eligible First Mortgage on the residence. (The First Mortgage must not be tied to a tax-exempt bond loan program.)
- Intend to occupy the residence as your principal residence.
- Must not intend to use the residence in a trade or business.
- Most types of homes qualify. New and existing single-family homes, duplexes, town homes, condominiums and manufactured homes with certain restrictions are eligible properties. Additional requirements may be established for each individual MCC program by the Issuer or Program.
If you are a buyer and would like more information about this tax credit please give me a call anytime at (970) 266-9111