Great news! A Mortgage Credit Certificate provides a mortgage interest tax credit benefit for homebuyers whether or not deductions are itemized.
A Mortgage Credit Certificate is a federal tax credit for up to $2,000 and unlike a tax deduction, a Mortgage Credit Certificate reduces federal tax liability dollar for dollar for homebuyers.
How is a Mortgage Credit Certificate obtained?
A Mortgage Credit Certificate is issued exclusively in Vermont by the Vermont Housing Finance Agency (VHFA) for Vermont homebuyers. The Mortgage Credit Certificate is issued to homebuyers at the time of home purchase and can be used through the life of the loan as long as the home is occupied as a primary residence.
How is the Mortgage Credit Certificate tax credit dollar amount determined*?
The Mortgage Credit Certificate value is determined based on the lesser of (a) 30% of total mortgage interest paid annually or (b) $2,000. The tax credit is reported on Form 8396 which is used to determine the maximum credit based on total tax liability and face value of the Mortgage Credit Certificate. The remaining 70% of mortgage interest paid can be itemized as a deduction on Schedule A to the Form 1040 to help further reduce federal tax liability.
To find out more about a Mortgage Credit Certificate, contact a VHFA Participating Lender today!
*VHFA is not licensed to provide tax advice, please consult a tax professional for specific questions about how a Mortgage Credit Certificate will influence individual tax liability.
Article Reference
https://www.fdic.gov/consumers/community/mortgagelending/guide/part_2_docs/mortgage_tax_credit.pdf