Eligible Iowans can now buy a home and reduce their federal income tax liability by up to $2,000 a year for the life of their mortgage under a new program announced Monday by the Iowa Finance Authority.
Dave Jamison, IFA executive director, said the Take Credit Mortgage Credit Certificate program, which started Jan. 1, may benefit about 1,000 Iowa home buyers.
After an eligible homeowner has closed a mortgage loan with his agency, Jamison said the authority will issue the homeowner a mortgage credit certificate for pre-approved applicants. The homeowner in turn may apply the credit against their federal income tax liability on an annual basis for the life of their mortgage. The credit may be claimed on IRS Form 8396.
Eligible home buyers must be approved for a mortgage and meet federal requirements, including income limits, maximum home sale price, limited prior homeownership interest and purchasing the home as a primary residence, he said. Those requirements vary by counties, so Jamison advised interested Iowans to look at information – such as a participating lender list and eligibility guidelines – provided via quick check tool at the IowaFinanceAuthority.gov Web site.
Gov. Terry Branstad noted that according to industry officials, Iowa home sales are up more than 12 percent compared to 2011. He said the new IFA program will provide an added incentive for Iowans to purchase a home.
“Through the program, 50 percent of eligible homeowners’ mortgage interest becomes a tax credit that can deduct dollar-for-dollar from federal income tax liability,” said Lt. Gov. Kim Reynolds. “For example, a family with a $70,000 four percent fixed interest, 30-year mortgage would receive a tax credit of $1,388.78 in the first full year of homeownership. I encourage Iowans to look into this valuable resource provided by the Iowa Finance Authority.”
The mortgage credit certificate was authorized by Congress in the 1984 Tax Reform Act and functions like a federal income tax credit. Funding for the program is made available through federal private activity bond volume cap, which was set to expire last Dec. 31 if not used, Jamison said. The mortgage certificate credit funding of $50 million will be available through 2014 or until the funds are expended, he noted.
Jamison also announced that is agency is sponsoring a ‘Home in Paradise’ social media contest January through March that will give all Iowans a chance to win an Iowa vacation package. “The contest is a fun way to gain momentum for homeownership as we simply ask Iowans to show us the creative ways that they beat cabin fever over the winter months. I encourage lenders, Realtors and real estate agents to sign up today to offer this contest to their clients at IowaFinanceAuthority.gov/Contest,” he said.