MD HomeCredit Program can aid in lowering taxes

MD HomeCredit Program can aid in lowering taxes

Lauren Bunting

(Sept. 19, 2014) In a recent article, the programs available through the Maryland Department of Housing and Community Development’s (DHCD) were summarized including the Maryland Mortgage Program, Down Payment and Closing Cost Assistance, and the HomeCredit program.

We briefly touched on the HomeCredit program, but it is such an important new feature being offered by the state of Maryland, this article focuses on it specifically.

The MD HomeCredit program offers a tax credit that can help homeowners lower their federal taxes every year, for the life of the loan. This program was just released in 2014, and it can save a homebuyer tens of thousands of dollars over the life of a home loan.

Most homeowners are aware of the mortgage interest deduction, where a homeowner can claim the interest paid on their mortgage each year on their federal taxes. But, the MD HomeCredit Program is different in that it provides a federal “tax credit” to eligible homebuyers. The difference is that the mortgage interest deduction provides a deduction that reduces the homeowner’s taxable income, whereas the tax credit provides the homeowner with a reduction in their actual federal tax liability (or taxes owed).

The value of the federal tax credit that can be claimed annually is equal to 25 percent of the value of mortgage interest payments, up to $2,000 annually. For instance, if you pay $6,000 in mortgage interest in a year, you will be able to take a $1,500 tax credit off your federal tax liability. This credit is for the life of the loan (until payoff, sale, refinance or transfer of ownership).

This tax credit program is not available if you already own your home, or are refinancing. Only new purchases would qualify, and interested homebuyers must apply through an approved mortgage lender who will confirm the borrowers’ eligibility for the program and then submit an application to the DHCD. To be eligible, you must meet the same income limits and home purchase price limits as the Maryland Mortgage Program; you cannot have owned a home in the past three years, unless you are purchasing in a “targeted area”; and, the home you purchase must be your primary residence. The income and purchase price limit charts are available online at mmp.maryland.gov.

The cost to participate is $1,100 if only applying for the HomeCredit program, or $450 if applying for both the Maryland Mortgage Program loan as well as the HomeCredit program.

The website also provides a downloadable calculator that helps estimate how much savings you’ll be afforded by using the HomeCredit program.

Lauren Bunting is a licensed realtor with Bunting Realty, Inc. serving Worcester and Wicomico counties.

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