Tax Reform may make the Homebuyer Tax Credit More Valuable

tax reform and real estate tax credits

Tax reform for homeowners.

One of the benefits of owning a home as a primary residence is the ability to write off the taxes and interest paid which lowers your net income and the amount of tax you must pay.   But if the standard deduction is doubled as proposed in the tax reform we are hearing about, that may make the standard deduction higher than the deductible tax and interest for many homeowners.   But a homebuyer with a tax credit will still get up to $2000/year tax credit!

In NH tax a home buyer can purchase an MCC – Mortgage Credit Certificate – allowing him or her to file IRS form 8396 and receive a tax credit which is better than a deduction – a tax credit is a direct reduction of a the tax.

Under the proposed tax reform, a mortgage of $200,000 at at rate of 4% would have $8000 in interest and lets guess $6000 in taxes.  That would be $14,000 in deductions which is less than the proposed standard deduction of $24,000.    So there would be no net tax benefit to purchasing this home.   However, if the home buyer has a mortgage credit certificate  then they would get a tax credit, in this example, of $2000!

And Remember, tax credits aren’t necessarily for first time buyers any more.  Click here to read my blog on eligibility for the tax credit.
Author: Renee Duval – A Certified Mortgage Professional (CMP) with the NH Mortgage Bankers & Brokers Association. NMLS# 97937. Merrimack Mortgage Company, NMLS#2561, is an Equal Housing Opportunity lender. The views expressed in this blog are those of the author, Renee Duval,and do not reflect those of her employer, colleagues or its clients. The information provided is for informational purposes only and is not intended as legal or tax advice. Programs are subject to change without notice and underwriting approval.


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