Some homebuyers in the state of Florida may be eligible for a tax credit of up to $2,000 each year on their mortgages, but many first-time homebuyers don’t know about the program. The Mortgage Credit Certificate (MCC) program was established by the Florida Housing Finance Corporation to reduce eligible borrowers’ federal income taxes. The program was originally launched in 2005 but was suspended until 2013 because of the housing crisis.

How it works

Homeowners who have the credit are allowed to use half of their annual mortgage interest (up to $2,000) as a direct federal tax credit. The rest of their mortgage interest will still continue to qualify as a tax deduction for federal income tax purposes.

As an example, consider a borrower with a $100,000 mortgage at 5 percent interest for 30 years. That borrower would pay approximately $5,000 in mortgage interest in the first year of the loan. But with an MCC, the borrower gets a tax credit of $2,000. 50% of $5,000 is $2,500, but the maximum allowance is $2,000. So the homeowner gets to subtract $2,000 from his or her taxable income. In addition, the remaining $3,000 of mortgage interest can be deducted.

The program is good for the life of the mortgage, which could amount to 30 years of tax credits. The program offers another advantage: eligible borrowers can use that extra “income” as part of their loan qualification. That could help those buyers qualify for a higher mortgage.

Find out more

The eligibility requirements vary from county to county in Florida, and also by the number of persons in the household. The maximum purchase prices for a new home under the program also vary by county, and whether an area is “targeted” or “non-targeted.” Targeted areas are based on household incomes in a specific area. While this may seem confusing, the Florida mortgage experts at Embrace Loans can help you determine your first-time homebuyer eligibility and how the MCC can help you with your existing mortgage or with buying a new home. Contact us today at 407-733-6425.

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