How Does a Mortgage Credit Certificate from the VHDA Work?
If you’re looking to purchase your first home, you could begin the process by applying for a Mortgage Credit Certificate (MCC) and possibly saving thousands of dollars. A helpful non-profit to familiarize yourself with if you are searching for a home in Virginia is the Virginia Housing Development Authority (VHDA) which serves as a great resource for first-time homebuyers and offers fantastic programs with the MCC.
What exactly is an MCC? MCC’s are certificates issued by Housing Finance Agencies (HFA’s) that are designed to help first-time homebuyers qualify for a home loan by reducing their tax liabilities below what they would otherwise have to pay. With an MCC, borrowers can receive a dollar-for-dollar tax credit for a portion of the mortgage interest they pay each year.
· The credit is equal to 20 percent of the annual mortgage interest you pay.
· The remaining 80 percent may still be taken as a tax reduction.
· The MCC is effective for the life of your mortgage, as long as you live in the home.
You should keep in mind that there is a difference between tax deductions and tax credits. Tax deductions reduce your taxable income which in turn lowers your tax liability. On the other hand, tax credits are subtracted directly from your total federal income tax and can reduce your tax liability even more.
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