-For example, a borrower with a 5.5% fixed rate 30-year mortgage of $150,000 would make approximately $8,200 in interest payments during the first year of the mortgage. With a MCC of $1,640 (20% of $8,200) of the interest payments would be allowed to be taken as a tax credit toward the your federal income tax liability. This would effectively add into your monthly income $136.67 ($1640 / 12 months = $136.67)
** Mortgage Credit Certificate = ($1640 / 12 months) = $136.67 MORE in your paycheck each month. This can help in household bills, towards the mortgage, savings..... Remember the monthly benefit varies by your loan amount and interest rate!!
When using the MCC tax credit rate, you are still eligible to deduct the remaining 80% of annual mortgage interest from your taxes (because remember the MCC is the first 20%)
-For example, assume you pay $8,200 for the first year in mortgage interest. With a 20% MCC, the homebuyer could take a credit of $1,640 upfront in your paycheck(20% of $8,200), and an additional mortgage interest deduction of $6,560 (80% of $8,200) when you file your taxes.