What is the Alabama Mortgage Credit Certificate (MCC) program?
The Alabama Mortgage Credit Certificate (MCC) program provides a federal income tax credit to eligible homebuyers. This credit reduces the amount of federal taxes owed, making homeownership more affordable.
How does the MCC program work?
The MCC allows homebuyers to claim a percentage of the annual mortgage interest paid as a tax credit. Rates vary based on loan amounts: 20% for loans above $150,000, 30% for loans between $100,001 and $150,000, and 50% for loans of $100,000 or less. The credit can significantly reduce the cost of homeownership.
Who is eligible for the MCC program?
Eligibility requires meeting income and purchase price limits, which vary by county and household size. Buyers must use the home as their primary residence, and first-time homebuyer requirements may apply in non-target areas.
Can the MCC be combined with other mortgage programs?
Yes, the MCC can be used alongside AHFA's Step Up program or other 30-year fixed-rate mortgages. Combining these programs can provide additional financial benefits, such as down payment assistance and tax savings.
How much is the maximum tax credit under the MCC program?
For loans up to $150,000, the maximum annual tax credit is $2,000. For loans over $150,000, there is no cap on the tax credit, offering significant potential savings for homebuyers.
Are there restrictions on the type of home I can purchase?
Yes, the program only applies to single-family homes, condominiums, and townhouses that meet eligibility criteria. The property must be located in Alabama and used as the buyer’s primary residence.
Does the MCC program have income and purchase price limits?
Yes, the program has specific income and purchase price limits based on the property's location and household size. For example, as of 2025, the income limit for a 1-2 person household in most counties is $97,300, and the purchase price limit is $481,176 in non-target areas.
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Get Started NowWhat types of loans are compatible with the MCC program?
The MCC can be used with conventional fixed-rate, FHA, VA, Rural Development, and privately insured mortgages. This flexibility allows buyers to choose the best loan for their needs.
Can I transfer my MCC if I refinance my mortgage?
Yes, the MCC can often be reissued if you refinance your mortgage. Specific rules and conditions apply, so it’s important to ensure compliance with program guidelines during refinancing.
How does the MCC affect my tax return?
The MCC reduces your federal tax liability dollar-for-dollar based on the mortgage interest paid. For example, if your MCC rate is 30% and you pay $5,000 in mortgage interest, you can claim a $1,500 tax credit while still deducting the remaining interest.
Is the MCC program available for repeat homebuyers?
Repeat homebuyers may qualify if purchasing a home in a designated target area. For non-target areas, only first-time homebuyers are eligible, except for certain exemptions.
What happens if I sell my home after receiving an MCC?
If you sell your home within nine years, you may be subject to a federal recapture tax. This tax is based on factors like income, the gain on the sale, and the length of time you owned the home.
Can the MCC program be used for second homes or investment properties?
No, the MCC program is strictly for homes that will be used as the buyer’s primary residence. Second homes and investment properties are not eligible.
What are the benefits of the MCC program for homebuyers?
The MCC program reduces the cost of homeownership by providing an ongoing federal tax credit. It helps lower monthly costs, increases affordability, and offers potential savings over the life of the loan.
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Get Started NowDo I need to repay the MCC tax credits if I move out of my home?
If you move out of your home and it no longer serves as your primary residence, you may lose the tax benefits associated with the MCC. Additionally, selling the home within nine years could trigger a recapture tax.
How do I calculate the tax credit I can receive with the MCC?
The tax credit is calculated by multiplying the annual mortgage interest paid by the MCC rate. For example, if you pay $6,000 in mortgage interest and your MCC rate is 20%, your tax credit would be $1,200.
Are manufactured homes eligible for the MCC program?
Manufactured homes may qualify if they are permanently affixed to a foundation and meet other eligibility requirements. They must also be used as the buyer's primary residence.
How long does the MCC benefit last?
The MCC benefit lasts for the life of your mortgage, as long as you occupy the home as your primary residence and continue paying mortgage interest. This can provide significant long-term savings.
Can I reapply for an MCC if I purchase a new home?
Yes, you can apply for a new MCC if you purchase another eligible home, as long as you meet the program’s requirements. Each home must qualify individually.