What Is The Mortgage Interest Credit?

 

The mortgage interest credit helps Lower-Income individuals purchase and own their own home. If you qualify, you can claim this credit Each Year based on a portion of you HOME MORTGAGE INTEREST.

Do I Qualify For The Mortgage Interest Credit?
Eligibility Requirements:
– You must have a Mortgage Credit Certificate from you state or local government. You must have this before you get a mortgage and buy your home.
– You must obtain a New Mortgage for the purchase of your Main Home That You Live At.
– The home must be located within the Governing Area of the state or local government agency that issued the certificate.
 

Limitations Of This Credit:
– The Credit Rate is the percentage used to caculate the mortgage interest credit, and is between 10% and 50% Of The Qualified Mortgage Interest you pay. The government agency who issues your MCC determines this credit rate.
– If the credit rate is greater than 20%, the mortgage interest credit is limited to $2,000 Per Year. The credit is limited by the Allowable Amount Of Mortgage Debt (also known as the Certified Indebtedness) that is shown on your MCC

EXAMPLE: If the amount of your mortgage loan is greater than the allowable debt on your certificate, then your credit is caculated based on interest paid on the allowable debt, not the total interest you paid on your full mortgage debt.

– The credit is limited based on the amount of Taxes You Owe Minus Any Credits. That means if the mortgage interest credit is bigger than what you owe in taxes , the credit reduces your taxes to zero. However, the remaining is not lost becasue you can carry forward for three years or until it is used up.
– If you cannot use all of the allowable mortgage interest credit, you can Carry Forward the unused portion of the credit over the next Three Years or until you’ve used up the credit, whichever comes first..
– You cannot claim the credit if you paid the interest to someone who is Related To You.

Special Circumstances Or Exceptions:
– If you purchase you home and claim the mortgage interest credit,and then Sell Your Home Within Nine Years, you might have to repay some of the credit that you took in prior years. Do this using FORM 8828, Recapture of Federal Mortgage Subsidy.
– If yo Refinance Your Mortgage , you must have a new mortgage credit certificate (MCC) to claim the credit on the new loan. Also, the new credit amount cannot exceed the original credit amount.

WHAT PAPERWORK DO I NEED FOR THE MORTGAGE INTEREST CREDIT?
To calim this credit, be sure to keep the following items For Your Records:
-Mortgage Credit Certificate (MCC) showing the credit rate and certified indebtness amount (the allowed amount of mortgage debt)
-Form 1098, Mortgage Interest Statement
-Your Prior Year’s Tax return if you are carrying forward any unused credit