Mortgage Credit Certificates (MCC)
A Mortgage Credit Certificate, also known as an MCC, is a dollar-for-dollar tax credit that reduces the amount of federal income tax paid by a first-time homebuyer. The tax credit is equal to 20% of the mortgage interest (not to exceed $2,000) paid during the tax year. Homeowners are eligible for the tax credit every year they occupy the home as their primary residence. If the amount of the MCC credit exceeds the MCC holder’s tax liability, the unused portion of the credit can be carried forward to the next three tax years or until used, whichever comes first.
Remember, the MCC is a tax credit – it is not a loan.
It is up to the homeowner to file the appropriate Internal Revenue Service form to claim the credit annually. Form 8396 is issued by the IRS and used by homebuyers who were issued a Mortgage Credit Certificate by Montana Housing.
Here is an example of how this tax credit works:
On a $150,000 mortgage with an interest rate of 4.00 percent, a borrower will pay $6,000 in interest the first year. The MCC would allow that borrower to take a federal dollar-for-dollar income tax credit of $1,200 ($6,000 x 20%) for that year. For those who itemize deductions, please note that that a borrower can still claim a mortgage interest deduction for the remaining 80% of the mortgage interest paid.
A borrower doesn’t have to wait until tax time to reap the benefits of an MCC! Once a borrower knows their annual tax credit, they can revise their W-4 with their employer to reduce the amount of federal taxes withheld from their paycheck. Using the previous example, a borrower would take the federal tax credit of $1,200 and translate it into an additional $100 in their monthly paycheck.
Montana Housing MCC’s can be attached to any loan statewide, except for a loan financed through any other Montana Housing Program. Borrowers must apply for an MCC through a participating lender after the purchase contract has been signed, but before the time of closing. Participating lenders will work with homebuyers to complete the MCC application and deliver required documentation to Montana Housing. There is an application fee for the MCC program.
Mortgage Credit Certificate (MCC) Re-Issuance
In the event a borrower who receives an MCC refinances their mortgage loan, Montana Housing may, but is under no obligation, elect to re-issue such MCC in accordance with the terms and conditions as set forth in the Mortgage Credit Certificate Guide. However, the MCC will be reissued for the amortized balance of the original loan, even if the loan amount is increased in the refinance.
Memo explaining re-issuance of MCC after refinancing
MCC Re-issuance Application and Affidavit (Exhibit J)
Additional Useful Information:
Mortgage Credit Certificate Guide
MCC Fact Sheet