Never heard of the Colorado Housing Finance Authority (CHFA) Colorado Mortgage Credit Certificate Program (MCC)? CHFA’s MCC programs offer the ability for Colorado home buyers to receive a tax credit of 20% of the mortgage interest they pay annually (the homeowner can still deduct the other 80% of mortgage interest paid). What’s the big deal as mortgage interest is already tax deductible? CHFA’s Colorado MCC is a tax CREDIT providing a dollar for dollar reduction in tax liability, where as a tax deduction only reduces the taxable income a Colorado home owner must pay taxes on. The bottom line is the tax credit from CHFA’s MCC program will save the home buyer more money (see chart below).
Guidelines for Colorado Home Buyers using CHFA’s MCC Program
To qualify for CHFA’s MCC program you must be purchasing a home in Colorado and be a first time home buyer, qualified veteran, or any home buyer purchasing a home in Colorado in a targeted area. The home buyer must also meet the income limits and purchase price limits to qualify for the MCC program and occupy the property as their primary residence. It’s important to note the homeowner can only receive the tax credit for as long as they occupy the home as their primary residence. CHFA’s Colorado MCC program is a mortgage enhancement and can be used with any type of loan (FHA mortgage, Conventional mortgage, VA mortgage…) and is not restricted to CHFA mortgage loans.
|
County |
Income Limit 1-2 Person Household |
Income Limit 3+ Person Household |
Purchase Price Limits |
|
Boulder |
$89,600 |
$103,000 |
$414,000 |
|
Denver Metro |
$75,900 |
$87,200 |
$365,600 |
|
Larimer |
$74,900 |
$86,100 |
$281,200 |
|
Weld |
$71,000 |
$81,600 |
$375,000 |
Recapture Tax for CHFA’s Colorado MCC Program
CHFA’s Colorado MCC program is subject to recapture tax if the home buyers sells or refinances the property within nine years AND receives a profit of 50% or great AND their income increases by more than 5% per year. If the Colorado homeowner meets all three criteria then they would have to pay the recapture tax when they file their taxes the following year. However, if you obtain a CHFA first mortgage with the MCC, CHFA will reimburse the recapture tax.
For more information on CHFA’s Colorado MCC program please feel free to contact us any time.
CHFA’s Colorado MCC Tax Example
|
|
Colorado Home Buyer WithOUT MCC |
Colorado Home Buyer With MCC |
|
Gross Yearly Income |
$50,000 |
$50,000 |
|
Interest Deduction (Sch A) |
$9,453 |
$7,782 |
|
Exemptions |
$3,500 |
$3,500 |
|
Taxable Income |
$37,047 |
$38,718 |
|
Taxes Paid |
$5,444 |
$5,869 |
|
Tax Credit |
$0 |
$1,671 |
|
Tax Refund |
$286 |
$1,532 |
Please Contact Us with any questions.
Originally Posted on Colorado Homes IQ Blog.
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