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Mortgage Credit Certificate

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Real Estate Agent with TIM LORENZ - Elite Home Sales Team DRE# 00919781

Mortgage Credit Certificate

 

A Mortgage Credit Certificate (MCC) allows the homebuyer to claim a tax credit for some portion of the mortgage interest paid per year. It is a dollar-for-dollar reduction against their federal tax liability. The mortgage interest credit provided by an MCC is a non-refundable tax credit; therefore, the homebuyer must have a tax liability in order to take advantage of the tax credit.

A mortgage interest deduction differs from a mortgage tax credit. All homebuyers, regardless of income, may take a mortgage interest deduction, whereas mortgage tax credits are available only to holders of MCCs. A tax deduction represents an expense incurred by a taxpayer. The expense is deducted from the gross income lowering the overall taxable income. A tax credit reduces the tax owed, rather than reducing taxable income.

In order to be eligible for the MCC program, a borrower must be a first-time homebuyer or have not had ownership interest in a home as a primary residence during the last three years. In addition, the annual household income must not exceed $111,480 for 2 persons or less or $130,060 for 3 persons or more. The home's purchase price cannot exceed $637,645 and it must be the borrower's primary residence.

These numbers apply to the County of Orange MCC program which currently allows for 15% of the annual mortgage interest paid. When the borrower formally applies for their home loan through Bank of America, they can apply for the Mortgage Credit Certificate as well. The MCC is available on conforming Fannie Mae, Freddie Mac, FHA and VA mortgages.

  

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