An MCC is a certificate, awarded by the CDC, authorizing the holder to take a federal income tax credit. A qualified applicant who is awarded an MCC may take an annual credit against federal income taxes of up to twenty percent (20%) of the annual interest paid on the approved mortgage. the value of the MCC is taken into consideration by the mortgage lender in underwriting the loan and may be used to adjust the borrower's federal income tax withholding. This adjustment will result in an effective reduction in monthly housing costs.
A tax credit entitles a taxpayer to subtract the amount of the credit from his or her federal income tax due, allowing the taxpayer to receive a dollar-for-dollar savings. This is different from a tax "deduction", which is subtracted from adjusted gross income before federal income taxes are computed. With a deduction, only a percentage of the amount deducted is realized in savings. An MCC produces a tax credit.
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