1. Presented by Cleo Evans
Mortgage Tax Credit
Presented by
Cleo Evans
Good morning,
My name is Cleopatra Evans, I am the homeownership Coordinator here at the Ohio Housing Finance Agency known as OHFA.
And today I will talk to you about our - Click to next slide

2. Mortgage Tax Credit
Commonly known as Mortgage Credit Certificate (MCC).
There are during tax year, end of tax year, and retention benefits.
Principal residence
OHFA offers two tax credit programs.
Mortgage Tax Credit Basic Program
Market Rate Program w/MTC Plus
our mortgage tax credit programs, which is commonly known as the Mortgage Credit Certificate …MCC.
It is important to know that a MCC has during tax year benefits, end of tax year benefits and retention benefits. All of these benefits I will cover in this presentation.
But one thing you must keep in mind, these benefits apply as long as the home remains borrower’s principal residence.
After I discuss the benefits of a MTC/MCC you as a participating lender have the option to use the two credit programs
Our Basic tax credit program and/or
Our Market Rate w/MTC plus
These tax credit programs
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3. Mortgage Tax Credit
An MCC is only issued through state or local government entities during the process of that individual purchasing a principal residence.
Its creation was intended to help individuals afford home ownership.
By allowing part of their home mortgage interest to be claimed as a credit.
Are only issued through a state or local government entity. And borrower can get this credit during the process of purchasing a principal residence.
Again, they can only use the credit while the home they purchase remain their principal residence.
The federal government created this tax credit to stimulate affordable homeownership, by allowing borrowers to claim a portion of the mortgage interest as credit to directly affect taxable income.
So lets discuss …..NEXT Slide

4. Discussion Lesson 1: End of tax year benefit
How credit is used at year’s end.
Lesson 2: During tax year benefit
How credit is used to provide income during year.
Lesson 3: Reissuance
OHFA will reissue MTC/MCC after refinance.
Lesson 4: OHFA MTC Programs
Difference in programs so lender and homebuyer both benefit
how this directly affect taxable income?
It directly reduces a borrower tax liability at end of tax year when preparing an individuals taxes.
Or by increasing disposable income during the tax year
And keeping these tax option even after a borrower refinance
All they get all this by utilizing OHFA two tax credit programs.
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5. Lesson 1: End of Year Benefit
Percentage of mortgage interest on Form 1098 as credit.
Use IRS Form 8396 to calculate credit amount.
Reduce home mortgage interest for itemization by credit amount.
Form 1040/1040NR, lines 53 and line 50 respectively. .
So how does this End of the year benefit work? It is done when the borrower completes their Federal Tax Return each year.
The borrower takes a percentage of the mortgage interest noted on 1098 they receive from lender. And the percentage is the credit rate on the borrower’s MCC.
The borrower must use IRS Form 8396, which I am going to show you later to demonstrate talking points, to determine how must mortgage to claim as a claim. Why because of credit can affect MCC credit limit or carryover.
Mortgage interest claim on Schedule A is reduced by amount of mortgage interest credit.
Form 8396 credit information is on 1040 or 1040NR lines 53 and/or line 50, respectively. Unless the IRS make changes to these forms.
All this information is in IRS publication 530.
Source: Publication 530: Tax Information for Homeowners

6. Lesson 1: Year End Calculation
Mortgage rate on certificate
Form 1098 on line 1.
MTC/MCC rate line 2.
Calculated amount line 3.
$2,000 limit if credit rate > 20%.
To reiterate.
The borrower mortgage credit rate is on the MCC so they have it when using Form 8396.
On Form 8396 line 1 needs the mortgage interest paid on line 1
Line 2 on Form 8396 ask for the Mortgage Credit Rate.
Multiply line 1 by line 2 to get calculated mortgage interest credit amount.
Just so you know any credit rate > than 20% mortgage interest credit amount is limited to $2,000
With all that said, let look over a sample federal return to demonstrate the tax credit end of the tax year benefits.
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7. Lesson 1: Federal Tax Returns
Form 8396
Form 1040
Schedule A
Click on Form link, discuss and show connections

8. Lesson 1: End of Year Benefit
Direct mortgage interest credit to reduce tax liability.
Based on mortgage paid during tax year on Form 1098 (first mortgage).
Limited to $2,000 for credit > 20%.
Reduce mortgage interest by credit amount for Schedule A.
Can still use credit when using standard deduction.
Following up with important points of end of year benefit

9. Lesson 2: During Tax Year
Increase disposable income by using the tax credit during the year.
Adjust W-4 withholdings.
IRS withholdings calculator.
During the tax year benefits basically means that borrower would prefer to use the end of tax year credit (income) during the year
To increase disposable income
By adjusting the W-4 withholdings.
This is a tricking step, but with some guidance, achievable.
Borrowers can use a tax professional or IRS withholdings calculator.
How is this accomplished?
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10. Lesson 2: Withholdings Credit is based on mortgage interest paid.
Adjust W-4 to determine number of allowances.
Various factors involved when making adjustments.
Seek help from the IRS or tax professional.
Interest
$ 7,946.39
MTC Rate
20%
25%
30%
40%
$ 1,589.28
$ 1,986.60
$ 2,000.00
Monthly $ $ $
Bi-Weekly $ $ $
Weekly $ $ $
Form W-4: Employee’s Withholding Allowance Certificate
IRS Withholding Calculator :
Just like our End of tax year scenario – have a close approximation of mortgage interest that will be paid during current tax year.
Adjust W-4 Allowances
But remember there are various factors involved when taking this step: Other credits, investment income, etc.
So we recommend a borrower seek professional help from the IRS or other tax providers.
We are not tax professionals.
Cleo demonstrate and discuss links on slide
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11. Lesson 2: During Tax Year
Similar to end of year credit, credit is based on mortgage interest paid on first mortgage.
Reduce federal taxes, which increase disposal income.
Again, every person’s tax situation is different so we recommend they talk to a tax professional.

12. Lesson 3: Reissuance
Another benefit to a MTC/MCC borrower is that OHFA will reissue their certificate if they refinance.
It is the borrowers responsibility to send this information after they refinance.
One year from date of refinance to submit documentation.
This certificate is not transferrable.
A borrower that has a MTC/MCC can still enjoy end and during tax year benefits if they refinance.
There documentation the borrower would need to send to us.
And they must have those documents to us with year from the date they refinance.
Just a FYI…the MCC is not transferrable to a new owner or go with current holder if the move.
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13. Lesson 3: Reissuance
For OHFA to reissue the MCC, the borrower will need to supply OHFA with:
Copy of original certificate or reissued certificate
Copy of new note
Copy of original note (when they first received certificate)
Copy of most recent year's federal tax return
Copy of new Settlement Statement
Current telephone number
$55 reissuance fee (cashier’s check or money order)
Here is the list of documents the borrower must send OHFA if they want to continue using their MTC?MCC.
This information is also on our website.

14. Lesson 3: Reissuance
Higher loan amount then calculate what % of mortgage interest can be claimed.
Smaller than indebtedness amount then claim full mortgage interest on Form 8396.
If the borrower refinance with a higher loan amount than certified indebtedness then they must calculated how much of the mortgage interest they must enter on Form 8396 line 1.
However, if their new loan amount is less than
Source: IRS Publication 530 “Tax Information for Homeowners, page 9

15. Lesson 3: Reissuance
Allows borrower to retain their MTC/MCC after refinancing.
Meet one year OHFA time frame.
New loan amount higher than original indebtedness limits % of mortgage interest claim.
Seek professional advice.

16. Lesson 4: OHFA MTC Programs
Two MTC/MCC Programs:
MTC Basic
Market Rate w/MTC Plus
Both offer different credit rates.
Both have OHFA fees.

17. Lesson 4: MTC/MCC Plus
All our Market FTHB loans are now available with MTC/MCC.
Second mortgage products plus closing cost assistance are available too.
Homebuyer would get a 40% tax credit.
Same fees as regular Market rate program except additional $500 fee: Lender gets $250 (optional) and OHFA $250.
OHFA sets Interest rates
US Bank service loans.

18. Lesson 4: MTC/MCC Plus

19. Lesson 4: MTC/MCC Plus

20. Lesson 4: MTC/MCC Basic
Used in conjunction with lenders first mortgage product.
Lender sets interest rate.
Excludes any additional OHFA products: second mortgages and/or closing cost assistance.
Offers 3 credit rate amounts: 20% non-target, 25% target, and 30% real estate owned.
OHFA $500 MTC/MCC fee

21. Lesson 4: MTC/MCC Basic/Plus
Use lender online to reserve, and submit compliance packages.
MTC/MCC Plus submit commitment package within 25 days; however, basic has 60 days.
MTC/MCC Plus requires homebuyer education.
Commitment approval letter is required before loan can close.
OHFA purchase package approval required before servicer purchase or certificate issued.

22. Summary of Training MTC/MCC has multiple benefits.
Credit to reduce tax liability.
End of the year or during the year benefit.
borrower can retain MTC/MCC after refinance.
Lender can utilize with company products and mortgage rates.
Utilize OHFA MTC/MCC products and rates.
Second mortgage
Closing Cost Assistance

23. Assessment and Evaluation
Which credit rate calculated mortgage interest amount is limited?
20% calculated credit is 2,025
25% calculated credit is 2,025
30% calculated credit is 2,025
40% calculated credit is 2,025

24. Assessment
B, C, and D
Credit rates > than 20% are limited to $2,000

25. Assessment
Paid $10,250 in mortgage interest, so what amount can be claim on Schedule A?
20% calculated credit as 2,050 =
25% calculated credit as 2,562 =
30% calculated credit as 3,075 =
40% calculated credit as 4,100 =

26. Assessment 8,200 Can take full credit amount 20% rate
7,688 Limited to 2,000
7,688 Limited to 2,000

27. Assessment OHFA’s MTC/MCC Basic requires homebuyer education?
True or False
MTC Basic and Market Rate w/MTC Plus can use OHFA DPA and CCA?

28. Assessment
False
Only our Market Rate w/MTC Plus requires homebuyer education because the MTC/MCC Basic has the lender rates and products. OHFA only issue a credit.
Only our Market Rate w/MTC Plus can use additional OHFA products.

29. Assessment
Homebuyer’s can register to get a MTC/MCC after they have purchased their home?
True or False
MTC Programs are not subject to Recapture?
MTC/MCC can be used as income?

30. Assessment False True During the purchase of their principal residence
All MTC/MCC are subject to recapture
True
MTC/MCC can be a source of income by way of W-4 withholdings.