MCC tax credit usage on a rental property

[micknorris]

I have a MCC tax credit issued by washington state for a home i purchased in 2015. I have lived in this home until mid year 2018 to where i converted it to a full time rental property. In 2019 the property was rented the entire year. Am i still able to claim the MCC tax credit for my property? I can't seem to find any info on this anywhere.

[AmyC]

I found this from Washington state regarding MCC is not currently supported or offered.. I can't find more, but I do know that in other states, the house must be your primary residence.

If you have questions about the Mortgage Credit Certificate Program, please call us them at  800.767.4663 or email info@heretohome.org.

From <https://www.wshfc.org/buyers/MCCprogram.htm>

[micknorris]

I already have the mcc from 2014. 

[MaryK4]

No, if you are using the property as a rental property, you cannot use the MCC.

@micknorris

[Sweetheart 0515]

My question is , is it legal to rent and just not claim the tax 

[DMarkM1]

You cannot claim the tax credit for years the property is not your primary residence.

[Edited 1/19/2021 6:27 pm EST]  

[passthebiscuits]

Does this mean I can legally use my property for one year as a rental and not claim the MCC but then re-use the MCC when I return to using the property as my primary residence?

[BrittanyS]

No, if your home is not used as your primary residence for which the MCC program was issued, there could be a recapture tax applied for that tax year. 

A re-issuance for the MCC would have to occur to continue receiving the credit for the property, as the MCC is currently not being offered in 2022.  There is a checklist for the re-issuance of the MCC.  See the link below for the Checklist:

MCC Re-Issuance Package Checklist

@passthebiscuits 

[passthebiscuits]

Thanks for your reply, @BrittanyS ! Follow-up question: I used an MCC between 2019-2021 while my house was my primary residence. As of June 2022, my house is no longer my primary residence and is being used as a rental (I currently live with my parents and do not own a secondary property). Does this mean my MCC is null and void? 

[HopeS]

No, if you are using the property as a rental property you cannot use the MCC. To qualify for the credit you must meet income and purchase price restrictions, and the home must be used as your primary residence.

See also page 4 of  the attached FDIC guidance which states under the Occupancy Section "Borrowers must use the home as their principal/primary residence."

Mortgage Tax Credit Certificate

@passthebiscuits 

[micknorris]

The recapture would only apply if you sold your home within the 9 year observance window correct? After 9 years there should be no recapture consideration.

[micknorris]

It wouldn't be void, you just can't use the MCC while it is a rental (secondary residence). If you were to convert it back to your primary residence and live there full time you would be able to claim MCC again. That is the way I understand it anyway. The language around MCC usage is super vague in my opinion. 

[passthebiscuits]

Thank you!! This is the exact guidance I was looking for. You're right: the language around the MCC is rather vague imho.

[BrittanyS · Accepted solution]

I have reached out to the Senior Program Compliance Administrator Homeownership Division with the Washington State Housing Finance Commission, Christian Hayes.  

Per his response, If you move out and rent the home the MCC is no longer valid from the year you move.  

However, as micknorris stated, the recapture tax would only occur if you sold the property within the first 9 years.  

@passthebiscuits 

@micknorris 

[passthebiscuits]

@BrittanyS thank you for checking on this!! This is SUPER helpful! 🙏🙏