Since 2010, California has offered first-time home buyers various tax credits. The Mortgage Credit Certificate (MCC) program covers some homes purchased in 2015 and later. The MCC tax credit is a federal credit which can reduce potential federal income tax liability, creating additional net spendable income which borrowers may use toward their monthly mortgage payment.

A tax credit is significantly better than a tax deduction. Whereas a deduction only reduces your taxable income, a tax credit reduces your taxable bill. The MCC tax credit program allows homeowners to subtract a portion of the mortgage interest they paid directly from any federal taxes they owe.

According to an article written by Tonya Moreno, CPA from thebalance.com, “The MCC tax credit is equal to 20 percent of the mortgage interest paid during the year.” And you can still take a deduction for the remaining 80 percent interest you paid if you itemize on your tax return.

You must of course, be first time home buyers to qualify, as well as be U.S. citizens and permanent residents of the property. Your home must also meet certain requirements.

CalHFA suggests that you find a MCC participating loan officer for assistance in claiming the tax credit. Visit CalHFA.ca.gov for more details. As always it is highly recommended that you consult your tax professional for further details and assistance. State laws can change and they are your resource for the most current laws and information regarding this credit.