Wednesday, November 6, 2013

Mortgage Tax Credit Information

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The information below is specific to South Carolina and the counties I live near, but the program is available in many states and follows the same general guidelines.  Information specific to your state and county should be available at your state housing website.  The information below should give you a general idea if you might qualify for the credit.  If you are a realtor, you should be familiar with this information for your area:

South Carolina Mortgage Tax Credit

The SC Mortgage Tax Credit is a Federal Credit of up to $2000 PER YEAR for purchasers of new homes that they use as their primary residence.  The program is administered by the State of South Carolina through the SC State Housing Finance and Development Authority (SC Housing).

The program starts with the taxpayer and their realtor identifying that they might qualify, and then identifying a qualifying lender.  The requirements to qualify vary from county to county, so I will provide specifics for Charleston, Dorchester and Berkeley counties, as well as links to find out the requirements from other counties.  These requirements can change at any time, so taxpayers, realtors and banks need to confirm the numbers at closing.

The Lender is responsible for providing the application and supporting documents to SC Housing who will subsequently issue a Mortgage Credit Certificate to the taxpayer.  This certificate allows the client to take the credit on their Federal Taxes.  There is a onetime application fee of $500 and the lender can charge up to $200 as well.  These will be included in normal closing costs.  The lender can use the expected credit amount as income to help the taxpayer qualify for the loan.  Only certain lenders can provide these, so I am including a link to the list at the end of this document.

The credit amount is 30% of the mortgage interest paid during the year, up to $2000.  Any interest that is not used for the credit may be used on Schedule A as a deduction.

The general requirements that need to be met are:
o   The taxpayer must be purchasing a home for use as a primary residence
o   The taxpayer must qualify as a first time home buyer (the requirement for this is either not owned another home within three years prior to closing or simply not own another home at the time of closing – the requirement depends on the county)
§  For Berkeley and Dorchester Counties you need only not own another home at the time of closing
§  For Charleston County you must not have owned another home for 3 years prior to closing
o   The home must be a single family residence (certain condominiums MAY qualify)
o   The home must be below a specified cost
§  For Charleston County this is $225,000
§  For Dorchester and Berkeley Counties this is $255,000
o   The taxpayers household income must be below a specified threshold
§  For Charleston County it is $61300 for households of 2 or fewer persons and $70495 for households with 3 or more persons
§  For Berkeley and Dorchester Counties it is $73560 for households with 2 or fewer members and $85820 for households with 3 or more members
o   The loan must be for 30 years

Here are some links:

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