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Governor David A. Paterson announced that New York will offer a federal income tax credit to first-time homebuyers to encourage home sales in the State. The New York State Mortgage Credit Certificate (MCC) will enable first-time homebuyers to claim a tax credit equal to 20% of their annual mortgage interest costs, potentially saving the average homebuyer about $1,500 each year. The program will effectively extend, and in some cases improve upon the federal government’s $8,000 First-Time Homebuyer Credit enacted as part of the American Recovery and Reinvestment Act of 2009, which expires on November 30th.
The New York State Mortgage Credit Certificate (MCC) can be used to reduce a homebuyer’s tax burden for every year the mortgage loan remains outstanding. With an MCC, 20% of the amount paid in mortgage interest becomes a tax credit that can be deducted, dollar for dollar, from a homeowner’s federal income tax liability. The remaining 80% of the mortgage interest continues to qualify as an itemized tax deduction, as long as there is sufficient federal tax liability. The MCC will be administered by the State of New York Mortgage Agency (SONYMA), a State agency that offers a variety of fixed-rate mortgages tailored to the needs of first-time homebuyers.
In the first year of ownership, a homeowner with a $150,000 loan at a 5.5% interest rate will likely pay $8,200 in interest on his or her mortgage. With an MCC, the homeowner can claim 20% of the interest, or $1,640, as a direct tax credit resulting in a savings of $137 per month. As long as he or she continues to occupy the property, the average homeowner can save approximately $1,520 per year over the first 10 years.
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