Eligible first-time Iowa home buyers can purchase 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 last week by the Iowa Finance Authority.
About 400 Iowa home buyers are expected to benefit from the program, which is available for new purchases via a network of Take Credit participating lenders throughout the state.
The amount of the tax credit for the 2015 program is set at 50 percent of the mortgage interest paid, up to a maximum of $2,000 per year, for up to 30 years. The remaining mortgage interest may be taken as a deduction from taxable income if the home buyer itemizes.
Eligibility for the Take Credit Program requires home buyers to meet household income and purchase price limitations and meet the definition of a first-time home buyer. The federal income limits vary by county, so the limits currently range from $65,300 to $111,300 per year.
A purchase price limit of $250,000 applies statewide with the exception of federally targeted areas where the limit is $305,000.
A first-time home buyer is defined as someone who has not owned their primary residence in the past three years but also includes home buyers purchasing in a federally targeted area and military veterans who have not previously financed a home using a tax-exempt bond program.
“This program will help to fuel an already-healthy Iowa real estate market,” Iowa Association of Realtors CEO Dave Bert said. “Statewide home sales have increased 5 percent over February of last year, home prices have increased and they are selling faster. The Take Credit program provides even more incentive for first-time home buyers to act now.”
Interested home buyers can apply for a mortgage credit certificate through a participating lender as part of their financing process. Buyers will need to have approval of the mortgage credit certificate before they close on a home, so they should ask their lender about this opportunity early in the application process.
The mortgage credit certificate was authorized by Congress in the 1984 Tax Reform Act, and capacity for the program is derived from an annual allocation of the tax-exempt bond volume cap from the U.S. Treasury Department.
The certificates are available on a first-come, first-served basis, and the program will be closed for further reservations once available funding has been exhausted.
More information is available at IowaFinanceAuthority.gov/TakeCredit.