Tax Credit for Home Buyers – The Mortgage Credit Certificate Program

Tax credit for home buyers are becoming more and more popular every day. Whether the economy is in an up cycle or a down, smart home buyers are looking for new ways to save money. The good news is, if you're a first time home buyer you may qualify for the Mortgage Credit Certificate.

The Mortgage Credit Certificate is a federal program which allows first time home buyers to lower their final income tax bill in the amount equal to twenty percent of the mortgage interest they pay as part of their mortgage.

Here's how it works…

Let's say I'm buying my first house and I ask my mortgage lender if he knows of a tax credit for home buyers. He answers by introducing me to the Mortgage Credit Certificate program.

At the end of the day, after explanations, charts, graphs, lessons and lectures I find out I'm going to pay $8,421 in mortgage interest by the end of the first year. Twenty percent of $8,421 is $1,684.

This means that when my personal income tax is due in the amount of $5,164, I could apply my Mortgage Credit Certificate and only have to pay $3,480.

Hey, not too bad. It's almost like free money.

Next year I'll receive another tax credit in the amount of 20% of the mortgage interest. Since a little less is interest and more is principle, my tax credit might only be $1,575. In any event, if I add up these tax credits for 30 years I'm talking big bucks.

Even if I only live in the home for seven years it's still well over $10,000 in direct tax credits.

Of course, with every good there is an equal not-so-good. There are restrictions.

There are purchase price limits; there are income limits; funds are limited; only two property types are included; certain restrictions apply. Overall, though, qualifying might not be too difficult for many first time home buyers. Ask if you have questions.

In summary, the MCC tax credit for home buyers is a program designed for first time home buyers allowing them a direct credit towards their income tax in the amount equal to 20% of their annual mortgage interest. Although certain restrictions, qualifying is not too difficult for many first time home buyers.