Home ownership may be closer than you think! If you missed out on the $8,000 one-time home buyer tax credit that the federal government offered a couple of years ago, it’s not too late. Texas has a new sheriff in town, so to speak — the Mortgage Credit Certificate (MCC) program allows eligible** first time home buyers to claim a credit on their federal taxes for 40% of their mortgage paid in a year, up to $2,000 per year for the life of the loan.
For example, if you buy a home and take out a $130,000 at 5% interest, your first year’s mortgage interest is $6,500. Forty percent of that interest is $2,600. If you qualify for the MCC program, you’ll get a $2,000 credit (that is, a dollar for dollar reduction in your federal tax liability) on your federal taxes. Plus, if you itemize your deductions, can take the remaining $4,500 as a mortgage interest deduction for the remainder of the interest that year. Who doesn’t like to save money on their taxes? And you get to keep taking that credit and deduction every year!! In all likelihood, that will end up netting you more than $8,000 over even the first five years of your loan.
**There are some exceptions, but if you live in the Austin area and your one or two person family makes less than $73,200, you may qualify for this great program. Families of 3 or more can make up to $84,180.