What is TAKE CREDIT?
TAKE CREDIT is a Mortgage Credit Certificate (MCC) program administered by Tennessee Housing Development Agency. The MCC Program was authorized by Congress in the 1984 Tax Reform Act. An MCC is not a loan. A MCC permits eligible homebuyers to take a federal tax credit up to $2,000 maximum per year based on the mortgage interest paid by the homebuyer. The tax credit may be used to lower a homebuyer’s income tax liability each year the home remains owner occupied by the certificate holder (the homebuyer).
Tax Credit vs. Tax Deduction
When the homebuyer buys his or her primary residence and itemizes his or her deductions, the federal government allows a deduction for a portion of the interest paid each year on the homebuyer’s mortgage loan. While taking a federal income tax deduction may lower the homebuyer’s federal income tax bill, it does so by reducing federal taxable income.
A federal income tax credit actually reduces the bottom line of the federal income tax bill on a dollar for dollar basis. For example, while a $2,000 tax deduction reduces a homebuyer’s taxable income, a $2,000 tax credit equals $2,000 in saved dollars by reducing the homebuyer’s tax liability or taxes due.
Unlike a deduction, TAKE CREDIT gives the homebuyer a federal income tax credit equal to 50% of the annual mortgage loan interest paid per year (up to $2,000). In addition, the homebuyer can still deduct the remaining interest paid.
Qualifying for TAKE CREDIT
The TAKE CREDIT MCC is available to the homebuyer for the life of the mortgage loan as long as the homebuyer lives in the home and as long as the MCC has not been revoked.
The homebuyer may be eligible for TAKE CREDIT if the following conditions are met:
- The homebuyer is purchasing a primary residence in Tennessee
- The homebuyer is a first-time homebuyer (i.e., has not owned a home in the last three years), or buys a home in a “targeted” county, or is a qualifying military veteran
- The homebuyer occupies the home as a primary residence
- The household income falls within the income limits for the county in which the primary residence is purchased
- The purchase price is within the limits established for the county in which the primary residence is purchased
- The homebuyer completed the required Homebuyer Education course. Information is provided by the lender; contact email@example.com for additional information for this course.
TAKE CREDIT may be used with Conventional, FHA, VA, and USDA-Rural Development financing for a new construction home purchase or with Conventional loans for an existing home purchase. It is not available for THDA bond-financed loans including the Great Choice Mortgage Loan Program. THDA does not act as the lender for loans qualifying for TAKE CREDIT.
Refinancing and Reissuance
The U.S. Department of Treasury has released temporary and proposed income tax regulations governing the re-issuance of a Mortgage Credit Certificate (MCC) when an MCC-related mortgage is refinanced. The refinancing provision is an exception to the general requirement that the mortgage in an MCC program cannot be used when refinancing an existing mortgage.
According to IRS Form 8393 and Publication 530, an MCC Holder must meet the following conditions to retain their existing MCC:
- MCC must be reissued to the same Holder with respect to the same property
- Reissued MCC must entirely replace the existing MCC
- The certified indebtedness on the reissued MCC cannot exceed the outstanding balance on existing certificate
- MCC credit rate must remain the same
- Reissued MCCs cannot result in a larger credit amount than otherwise would have been allowed under the existing certificate for any tax year
After refinance, the MCC Holder has up to one year to notify the Agency to reissue their certificate. The Agency must receive the following information to reissue an MCC:
- Copy of the Original MCC and/or Reissued MCC
- Copy of Original Note
- Copy of New Note
- Copy of Closing Disclosure
- Copy of recent Federal Tax Return with schedules
- A current telephone number in case the Agency has questions
Becoming a Participating Lender
THDA’s TAKE CREDIT Program is now accepting applications. Lenders who want to offer this new product must complete a TAKE CREDIT MCC Program Application and sign the THDA MCC Program Lender Participation Agreement. You do not have to be approved to participate in THDA’s bond-financed loans (Great Choice Mortgage Loan Program) to be able to participate in the TAKE CREDIT MCC Program. These are separate approvals. Please see application and agreement.
All Lenders wishing to participate in the TAKE CREDIT Program must complete the application and sign the MCC Program Lender Participation Agreement. An initial fee of $1,000 must be submitted with the application. An annual renewal fee will be required thereafter.
The application may be sent electronically to: firstname.lastname@example.org.
The agreement and fees may be sent to:
- Tennessee Housing Development Agency
Attention: MCC Program
502 Deaderick St., 3rd Floor
Nashville, TN 37243
Important Tax Information
THDA recommends seeking tax advice from your tax preparer to determine if TAKE CREDIT would benefit you.
- Application to Become a Participating Lender
- Lender Participation Agreement
- Participating Lender Closing Certification
- Builder/Seller Affidavit
- Holder Initial Affidavit
- Holder Closing Affidavit
- Notice of Recapture to Eligible MCC Holders
- Submission Checklist
- Annual Recertification Form
MCC Guide Revisions
Questions regarding the MCC Program should be addressed to email@example.com.