Owning your own home is a great investment that helps provide stability for you and your family. For some people, now may be a perfect time to purchase a home because of affordable prices and low interest rates. To stimulate home sales across the state and assist homebuyers in their quest to purchase a home, the state has made a new tax credit available that is expected to save qualified homebuyers thousands of dollars over the life of their loans.
The New York State Mortgage Credit Certificate (MCC) will enable first-time homebuyers to claim a federal tax credit equal to 20 percent of their annual mortgage interest costs, potentially saving the average homebuyer about $1,500 each year. This credit is in addition to the $8,000 tax credit the federal government is offering for first-time homebuyers. Unlike the federal tax credit that expires Nov. 30, the state program has no expiration date.
With the MCC, 20 percent of your annual mortgage interest can be converted into a tax credit and deducted dollar for dollar from your federal income tax liability. The remaining 80 percent of mortgage interest continues to qualify as an itemized tax deduction. For example, for a mortgage of $200,000 with an interest rate of 5.5 percent, the mortgage interest paid in the first year is $10,993. The MCC converts 20 percent of that interest to a direct tax credit – a savings of $182 per month.i The program is made possible by an Internal Revenue Service rule that allows states to trade their bonding authority for tax credits; it will not impact the state’s budget.
The program is available to prospective homebuyers purchasing their first home – it does not apply to existing homeowners. Only fixed-rate mortgages are eligible, participants must keep the house as their primary residence, and the loan can’t be refinanced.
Working families are the backbones of our community, and we need to do everything possible to ensure our families can afford to buy homes in our neighborhoods. If you’re considering buying a home, I urge you to take advantage of all the cost-saving opportunities these programs have to offer.
For more information about the first-time homebuyer tax credit and low interest fixed-rate mortgages, visit www.nyhomes.org. For information on the federal First-Time Homebuyer Tax Credit, visit www.federalhousingtaxcredit.com/2009/index.html or call my district office at 718-893-0202.