If you’ve ever driven into the Silicone Valley from I-5 south of Stockton, you’ve driven over the Altamont Pass. It’s an interesting place where the Rolling Stones played a concert and hired the Hell’s Angles to act as security. It didn’t work out to well. Then in the late 1970s people started building Wind Turbines up there. In fact a musician from Stockton even wrote a song about it called “Windmill Hills.” (It wasn’t a top-40 hit.)
The question is why? Any 1st year accounting student would tell you that they would never recover their capital costs – especially at that time given the costs of energy. …and yet they were built – and not just a couple of them, but a few hundred! The answer is simple: tax credits. You see after the “energy crisis” of the late 1970s, congress passed a bill that gave investors a “tax credit” for building 100% renewable, clean power generators. Evidently there were lots people in the bay area looking at some really big tax bills that decided that spending $30,000 to build a wind turbine was better than sending that $30,000 to the IRS. You see that’s how tax credits work; you just spend your money the way the government tells you to, and you don’t have to send it to them. You have to admit that spending $30,000 on a funky windmill is a lot better than sending $30,000 to the government.
A Tax Credit You can Use Every Year!
So what does that have to do with the Mortgage Credit Certificate (MCC) program? Well, the MCC is a tax credit program for homebuyers. What it does is take 20% of the interest spent, and subtract it dollar-for dollar from the TAX BILL. For example, if a borrower pays $10,000 on interest, they subtract 1/5 of that amount – $2,000 – from their tax bill! The borrower still “deducts” the other 80%, the property tax, etc. on their Schedule A; but when they are all done with that, they then take $2,000 off the bottom line. If they were going to have to pay $1,000 – now they are getting $1,000 back.
This program has been around for quite a while; however the funding has been inconsistent. Plus you had to live somewhere that had a housing agency to administer it. Sacramento is lucky to have SHRA – but, like everyone, they could only do so many MCCs. When the finding was gone, it was gone. The good news is SHRA just got their 2012 allotment, so they are good to go in Sacramento County for at least the next few months. Check them out here. Also, CHF does a good job administering the program in most of the rural counties around here. But the big news is it appears that CalHFA will be providing the program as well for those areas that have run out of funds or don’t have anyone offering the program. They don’t have the program completely up yet, but hopefully their participation will make this program available to all eligible buyers.
So if you’re looking to buy a home and haven’t owned one in the last three years (this makes you an official 1st time home buyer) be sure to look into this great program. In fact, you may be eligible even if you have owned in the last three years depending on where you are looking to buy. If you lender doesn’t’ mention it call me and we can see if you would benefit from an MCC.
By Bob Willett – Board Member