Mortgage Credit Certificates (Indiana)
MCCs are a kind of down payment assistance. The Indiana Housing and Community Development Authority offers them to eligible buyers.
MCCs aren't a direct form of assistance. Instead, you can take a tax credit on your federal tax return of up to $2000 in paid interest. This credit is not automatic.
Only people who have an MCC may claim the credit. The certificate comes after you apply for the program.
One way this helps is by giving you the option of adjusting your withholding. This gives you more take-home pay to work with. While you won't want to do that prior to purchasing the home, it's important to recognize the option. MCCs are non-refundable credits, so you won't increase your tax refund any by allowing the government to withhold more money.
But wasn't interest already tax deductible?
Interest is always tax deductible, but there's a world of difference between a tax deduction and a tax credit.
A credit decreases your tax liability directly. This can put you into a lower tax bracket, which can mean thousands of dollars in savings. A deduction lowers your taxable income.
Here's a good example of what that looks like from H&R Block:
"If you're in the 25% bracket, a $1,000 deduction lowers your taxes by $250. A $1000 credit lowers the bill by the full $1,000."
Keep in mind the $2,000 is the maximum amount you can claim, not necessarily the amount you will claim. If you only paid $873 in interest over the course of the year, then your tax credit for that year would be $873.
You'll need $500.00 to apply for the program. The IHCDA must then take a look at your loan before approving your participation in this program.
You need to either be a first-time home buyer, or you will need to purchase a home in an IHCDA targeted area. You also need to be within your county's income limits. These will vary by family size.
Don't automatically assume you make too much money. The limits are likely much higher than you think. For example, in Porter county a 1 to 2 person household is eligible if the household income is below $69,000, and a 3+ person household can have up to $79,465 in income. In some parts of the state, the limits are over the $100,000 range.
See this chart to see the limits for the county you want to buy in.
You may receive an MCC for a single family home, a duplex, a triplex, or a fourplex.
Active duty members of the military and veterans have the option of buying a home outside of the target areas, even if it is not their first home purchase.
Keep in mind you should not apply for an MCC if you plan to be in the house for less than 9 years. If you do, you might have to pay a "recapture" tax. This tax kicks in if you sell the home and make a profit. There is no recapture tax if you sell the home at a loss, or if you transfer your home to your former spouse as the result of a divorce. The maximum tax is 6.25% of the principal on your mortgage loan.
Want help applying for your MCC?
I will guide you through every part of the process, including your MCC application. And if you aren't eligible, I can help you look for other down payment assistance programs that might suit your situation better.
Call A&M Mortgage Group today, or stop by our Merrillville office to get more information. I'm looking forward to hearing your unique situation, and to learning how I can assist you in purchasing the home of your dreams.