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Mar 06

KHC Home Buyer Tax Credit

Kentucky Housing Corporation (KHC) is making available a tax credit to home buyers throughout the Commonwealth.  The tax credit reduces the amount of federal tax a home buyer must pay to the federal government.  KHC provides the home buyer a Mortgage Credit Certificate (MCC) which reduces the amount of Federal income tax by a substantial amount.  The result is more available income to qualify for a mortgage loan.

The tax credits are not mortgages, or any kind of debt for that matter. In fact, the net effect provides the tax payer/home buyer additional cash flow that could be used to pay off the mortgage quicker.  One way this can be accomplished is to have your employer reduce the amount of tax dollars withheld from your regular pay check.  This move will increase your take home pay even though the gross income remains the same.

Under the current federal tax code the government allows a homeowner to deduct the interest portion of their house payment from their income when filing their tax return.  A deduction is different than a tax credit.  A deduction is a reduction of the amount of income that is taxed.  A tax credit is reduction of the amount of tax you owe, big difference.

The MCC is a tax credit equal to 25% of the interest you pay up to a maximum of $2,000.  If the amount of mortgage interest you pay during the year is $8,000 then the tax credit would equal $2,000.  You could still deduct the remaining $6,000 on your tax return. Let’s say that you still own $2,500 in taxes after taking the deduction, here is where the tax credit kicks in, the amount of tax owed drops to $500.

The MCC stays in effect for the life of the loan as long as you continue to live in the house.

In order to be eligible to apply for the program you must be a first-time home buyer or have not owned a home in the last three years.  The sale price of the home must not exceed $243,000.  There are also income limits, 1-2 person household income up to $83,400 and a 3-4 person household is up to $97,300.

Of course the home must be located in Kentucky.  Take advantage of this exciting program offered by KHC.   Low down payments, low interest rates and a tax credit, now that is a trifecta you can count on!

Buying a property in Kentucky and want to be pre-approved for a mortgage and or tax credit? Visit my online application site or printand use this simple form to get started. If you prefer we can do it over the phone, call my direct line during normal office hours, (502) 753-4127.

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