Mortgage Interest Tax Credit
The mortgage interest tax credit is available for a first-time home buyer whose income is generally below the median income for the area of the home. The credit is intended to help the lower income individual afford home ownership. A tax credit is allowed each year for part of the home mortgage interest the homeowner pays. Any mortgage interest itemized deduction taken on Schedule A, Form 1040, is reduced by the amount of the credit taken, even if part of the amount is carried forward.
Eligibility for the Mortgage Interest Tax Credit
To be eligible for the credit, the buyer must get a mortgage credit certificate (MCC) from his state or local government. Generally, an MCC is issued only in connection with a new mortgage for the purchase of the buyer's primary home. Contact the appropriate government agency for information on the MCC before getting a mortgage and buying the house. The MCC will show the certificate credit rate to figure the homeowner's credit. The MCC will also show the certified indebtedness amount on which the interest is eligible for the credit. To claim the credit, complete Form 8396, Mortgage Interest Credit, and attach it to IRS Form 1040. Homeowners may also want to read IRS Publication 530.