SDHDA increases tax credits for first-time homebuyers
February 13. 2014 6:00AM
Last year South Dakota Housing Development Authority (SDHDA) began offering a new tax credit benefit for first-time homebuyers called a Mortgage Credit Certificate, or MCC. As the families who took advantage of the MCC in 2013 approach tax season, they are now realizing the benefits of the Tax Credit, which could add up to be as much as $2,000 every year.
Recently, SDHDA increased the MCC benefit to make it an even better deal in 2014.
When it was launched a year ago, this MCC option allowed borrowers to convert 20 to 40 percent of their mortgage interest into a tax credit, explained Brent Adney, SDHDA director of homeownership.
In 2014, he said, first-time homebuyers will realize an even bigger benefit as the percentages have increased to 30 to 50 percent for new loans.
łThe mortgage credit certificate has been a great option for first-time homebuyers in South Dakota, and this change will help even more individuals while they are in their first home,˛ Adney said.
He said 236 families took advantage of the MCC option in 2013, and he expects that number to increase.
The maximum tax credit remains at $2,000 per year. The exact amount varies depending on how much mortgage interest an individual pays, their income and other factors such as their tax liability. Unlike a tax deduction, the credit is a dollar-for-dollar reduction in the federal income tax that is paid.
For example, someone with a 30-year, $150,000 mortgage could receive a 40-percent tax credit of about $2,000 a year or $167 per month. And over the course of the loan, the benefit could be as much as $43,200.
The MCC concept was created by the Tax Reform Act of 1986 and due to a change in the way SDHDA finances its lending programs, it is now possible for the agency to offer the credits in South Dakota. This benefit is optional and borrowers should contact an SDHDA Participating Lender for more details.