There are many benefits of being a first-time home buyer in the Seattle area, but one perk RESG would like to highlight is a Mortgage Credit Certificate.
So what is a Mortgage Credit Certificate (MCC)?
A Mortgage Credit Certificate is a certificate issued by certain state or local governments that allow a taxpayer to claim a tax credit for some portion of the mortgage interest paid during a given tax year. With an MCC, a percentage of what you pay in mortgage interest becomes a tax credit that you can deduct dollar-for-dollar from your income tax liability. The remaining percentage is tax deductible. There must be a tax liability in order to benefit from this credit.
A borrower can use this credit one of two ways: They can claim the credit at the end of the year when filing their taxes or receive the benefit monthly through their employer by increasing exemptions on a W-4. Increasing exemptions provides less taxes being withheld from a paycheck, which in turn provides more take home pay.
There are two tax credit rates available, a 20% or a 40%. The 40% tax credit has a cap return of $2,000 while the 20% does not have a cap return. NRHA also has a MCC calculator available online at www.nvrural.org/mcc to help determine how much you will save in mortgage interest with the MCC program.
This information was taken from: www.ncsha.org/resource/2013-mortgage-credit-certificate-program-qa