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How the Mortgage Tax Credit Works

how the tax credit works

The way the US Tax code is written, each home owner is allowed to deduct part of their mortgage interest on their tax returns.   For first time home buyers in North Carolina, there’s a program that allows you to take an additional tax credit!  The Mortgage Tax Credit program is available to anyone who is currently living in North Carolina, has not owned a primary residence for the past three years – and meets the income and sales price restrictions for the county you are buying a home in.

Through the Mortgage Tax Credit (MCC) Program, you can receive a tax credit equal to 30% of the mortgage interest paid on your loan annually.  There’s an additional incentive for those who are purchasing a newly constructed home.  With the current Mortgage Tax Credit program, the W-4 is changed for the borrowers, allowing them to bring home more money in each paycheck.  The paperwork for this is done prior to closing on your loan – so it you purchased a home last year (for instance) and your mortgage lender didn’t offer the NCHFA Program. unfortunately, you are out of luck

Up to $2000 annually ( or roughly $167 a month) is added to your paycheck as a dollar for dollar reduction of your federal tax liability.  The remaining 70% of the interest you pay on your mortgage during the year is still a tax deduction on April 15th! (remember that there’s a

little different schedule for those buying a new home in NC).

You don’t HAVE to take the Mortgage Tax Credit income on a monthly basis – you can do an annual filing with your tax return – but most of the folks we help, go ahead and get the money on a monthly basis.

The additional Mortgage Tax Credit income helps first time home buyers in North Carolina qualify for a little higher mortgage payment, and the ability to purchase a little larger home!   The Mortgage Credit Certificate (MCC) program in North Carolina is not offered by many mortgage companies – so be sure to ASK.

The Mortgage Tax Credit can be used with a FHA Home Loan in North Carolina.  This program only requires a 3.5% down payment – and has the most flexible credit score requirements available. The MCC can also be used with a VA Home Loan program for Veterans, and the USDA Home Loan program in NC. both of which have no down payment requirements.

Here are the MCC program income limits for major cities in North Carolina, if the area you are interested in is not listed, please call us – we’re more than happy to help you find out if you qualify for the Mortgage Tax Credit.  The MCC Income Limits do vary based upon the County you are buying a home in.(Most of the MCC Income Limits are near the bottom of the page)

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