A mortgage credit certificate (MCC) is a certificate issued by some state and local governments that give first-time homebuyers a tax credit for part of the mortgage interest they pay. In general, people who want an MCC must meet some conditions:


  • You must live in the new home as your primary residence.
  • You must meet certain income and price restrictions.


Some of these restrictions may be waived in some cases. For example, a city or state government might raise the income or price restrictions to encourage home ownership in certain areas.

How Does it Work?

Let’s look at a simple example. Assume you’re a first-time homebuyer who has a $150,000 mortgage at 5% interest. Your first year’s interest would be approximately $7,500. However, if you have a 20% MCC, you would be able to reduce your taxable income by $1,500 that year ($7,500 x .20). If your annual income is $48,000, you’ll only pay taxes on $46,500. What’s more, you can still deduct the remaining $6,000 that you paid in interest from your taxes!

The amount of the mortgage credit varies by the state or local government issuing the MC, but it is normally capped by the IRS at $2,000. Typically, an MCC is good for the life of your mortgage though the benefit will decrease as you pay down your mortgage and your interest paid decreases. Sometimes, lenders will allow you to add an MCC to your available monthly income, which may let you qualify for a larger mortgage.

MCCs work with many types of mortgages, including FHA, VA, and conventional mortgages. There is one catch, though. You may be subject to a “recapture” tax if you don’t meet the conditions of the MCC, which could be expensive. In general, though, you won’t face the recapture tax if you remain in your home for nine or more years before selling.

Find Out More

If you are a first-time home buyer and want to find out more about MCCs and what may be available in Central Florida, call Embrace Home Loans at 407-733-6425. We can help you locate MCCs offered by housing agencies and determine which mortgage lenders participate in that MCC program.

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