The NC Home Advantage Tax Credit (and How to Get It)

The NC Home Advantage Tax Credit

Did you know that you can get a tax credit for buying a home in North Carolina? It’s true. If you qualify, the NC Home Advantage Tax credit can help you reduce your taxes.

 

Whether you’re shopping for a home loan in the Charlotte area or beyond, it’s important to understand the NC Home Advantage Tax Credit, how it works, and whether you qualify for it. This credit could save you thousands of dollars every year on your federal income taxes.


We’ll explain the basics of this tax credit so you can claim all of the tax benefits you’re entitled to when you have a mortgage.

What is the NC Home Advantage Tax Credit?

This tax credit is for certain North Carolina homebuyers who are taking out a home loan on their first home. It’s for first-time home buyers and veterans, and it can save you up to $2,000 on your federal income taxes in the form of a Mortgage Credit Certificate (MCC) you can take yearly.

Who is eligible

Not everyone seeking a mortgage in North Carolina is eligible for the NC Home Advantage tax credit. To qualify, you’ll need to be:

  • A first time home buyer or a veteran, OR
  • Buying a home in certain geographic areas (called “census tracts”)
  • Buying your home in North Carolina
  • A legal resident of the U.S.
  • Able to meet income requirements (Under $84,000 for 1 or 2 people, $96,000 for families of 3 or more)
  • Buying a home with a sales price of $345,000 or less

How it works

Here’s how the NC Home Advantage tax credit works. When you’ve selected a home, you’ll fill out a traditional mortgage application. Your lender will work with the state and confirm whether your loan qualifies for the MCC. 

 

Note: You must apply for the MCC and be approved before you purchase the home. You can’t do it after.


If it is approved, the mortgage credit certificate entitles you to receive a 30% tax credit for existing homes or 50% credit for new construction homes. You can keep claiming this credit each year for as long as you live in the house. You can even refinance your mortgage and keep claiming the credit, as long as you get a re-issued mortgage credit certificate.

Understanding Mortgage Credit Certificates

States provide MCCs to help make monthly mortgage payments more affordable for their residents. You claim the MCC as a credit on your taxes, and it reduces your tax liability.

 

Suppose you found a great Charlotte-area home, applied for and received the MCC, and got a mortgage for $100,000 with 3% interest. Your mortgage interest payments for the year would be $3,000:

 

100,000 x .03 = 3,000

 

If the home was new construction (a single family home or even a condo or townhouse), your NCHA mortgage credit could be 50% of that, or $1,500:

 

3,000 x .50 = 1,500

When you file your taxes, the credit will reduce your taxes owed by that amount — $1,500. So if you owe the IRS, say, $2,000 on your yearly taxes, your amount due would only be $500 after your MCC is applied.

 

2,000 – 1,500 = 500

 

That’s more money in your pocket for you. Note that the maximum credit amount is $2,000, though. Use our Mortgage Calculator to calculate your possible monthly mortgage payment and interest to see what you could save.


To claim the credit, you’ll use IRS Form 8396 and attach it to your Form 1040. Your accountant, tax prep software, or tax professional can help you complete the form correctly.

How to get the credit

Here’s the good news: If you’re shopping for a Charlotte home loan, there are nearly two dozen eligible areas just in Mecklenburg County that are within the required census tract for the NCHA tax credit. Dozens more are available throughout the state. So if you’re interested in this tax credit, you should let your mortgage lender know. They’ll use the address of the property you’re considering to see whether it’s located in the right census tract for this program. They’ll also help you figure out whether your income and home price qualify for the credit.


No matter where in North Carolina you’re looking to buy a home, Fairway of the Carolinas mortgage planners can help you find the perfect loan program for your situation — so you can afford the perfect home for your family.

References:

Copyright©2022 Fairway Independent Mortgage Corporation. NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.

*Eligibility subject to program stipulations, qualifying factors, applicable income and debt-to-income (DTI) restrictions, and property limits. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency. 

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