Can the NC Home Advantage Tax Credit, a mortgage credit certificate (MCC) administered by the North Carolina Housing Finance Agency, really save first-time home buyers thousands on their tax liability every year? It sure can! Learn the basics of this money saving tool, whether you may be eligible, and if so, how the NC Home Advantage Tax Credit can put more money back into your pocket to help you afford your home for the long term.
What is a Mortgage Credit Certificate?
A mortgage credit certificate, or MCC is a tax credit that home buyers can use to help make their homes more affordable by decreasing their tax liability. The NC Home Advantage Tax Credit, a mortgage credit certificate administered by the NC Housing Finance Agency, offers a 30 percent federal tax credit for existing homes or a 50 percent tax credit for new homes—up to $2,000 annually. Authorized by Congress in the 1984 Tax Reform Act, the MCC operates as a federal income tax credit for first time home buyers when secured at the time of your home purchase. This tax credit reduces your federal income tax liability if you have one, leaving more money in your pocket to use toward your mortgage. The Agency administers the Mortgage Credit Certificate for North Carolina through its participating lenders.
Am I Eligible?
To receive The NC Home Advantage Tax Credit, you must:
- Be a first-time home buyer or a qualified military veteran
- Meet certain income limits
- Meet certain sales price limits
How does it Work?
If you are eligible, your lender will reserve the NC Home Advantage Tax Credit for you when you are qualified for a home loan. Then, for every year of your loan, you will be able to reap the tax savings. For example, if you borrowed a loan amount of $100,000 at an interest rate of 5 percent for 30 years, you can expect to pay $5,000 in interest in the first year of your loan. With the NC Home Advantage Tax Credit (at 30 percent), you will be eligible to receive a federal income tax credit of $1,500 (30 percent of $5,000). If you have a federal tax liability, you will get more money back with your tax return by using this tax credit.
Do I Have to Wait Until I Get My Tax Return to See Benefits?
If you prefer to get your benefit in monthly increments as opposed to one lump sum at tax time, you can file a revised IRS W-4 Employee Withholding Allowance Certificate to receive your tax break throughout the year. Doing so will increase your monthly take home pay, which you can use for your home payments. Simply divide your expected tax credit by 12 and reduce your monthly withholdings by that amount. If you have any questions, you should consult your tax adviser.
How Long Do I Keep the Tax Credit?
The tax benefits are yours for the life of the loan. That means if you have a 30 year loan, you can enjoy the tax benefits for 30 years, as long as you have a tax liability and continue to live in the home as your primary residence.
Can I Combine the NC Home Advantage Tax Credit with an NC Home Advantage Mortgage™?
You can certainly combine tax saving benefits of the NC Home Advantage Tax Credit with the great rates and down payment assistance of the NC Home Advantage Mortgage™, or any other home loan. However, you cannot combine them with the NC 1st Home Advantage Down Payment product.
How Do I Get Started?
Contact one of our participating lenders about the NC Home Advantage Tax Credit to see if you qualify. If you do, your lender can submit your reservation when you purchase your first home. It is just that easy to save on your taxes each year, and ensure that you have more money in your pocket to afford your mortgage.
Talk to your lender or visit the agency website for more information about the NC Home Advantage Tax Credit, the NC Home Advantage Mortgage™ or any of our other products.
