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Chicago’s TaxSmart Program can put money in your pocket

February 9, 2011

by McKenzie Dhyr-Arnold – Guest Contributor

Are you buying a home? If you can answer yes to that simple question you could be eligible to receive an income tax credit equal to thousands of dollars each year with The City of Chicago’s TaxSmart program. This income tax credit is different from the normal income tax deduction everyone who has a mortgage already receives. (You will still receive the standard income tax deduction on mortgage interest).

The City of Chicago’s TaxSmart Mortgage Credit Certificate Program provides a federal income tax credit to qualified homebuyers. A tax credit is a direct reduction of taxes due. Under the program, a home buyer would receive a MCC (Mortgage Credit Certificate that would be included in their tax returns when filed) to reduce income taxes by an amount equal to 20 percent of the interest paid on a mortgage. The tax credit may be claimed each year the home buyer continues to live in a home financed under this program.

For example, if your mortgage is $300,000 with an interest rate of 5.25%, your federal income tax credit the first year would be $3,129.83. For the second full year your tax credit would be $2,884.33. (With each passing year you pay less in mortgage interest and more in principal, this is standard on fully amortizing loans) Keep in mind your first tax credit might only be a partial amount depending on the time of year you close, for example if you close in the Spring, you would only be paying on the mortgage for approximately 6 months so your tax credit would be just the interest in those 6 months for the first tax credit.

To qualify for this program you must meet a few guidelines for income and purchase price. If live in a household with 3 people or less, your annual income has to be $90,120 or less. If your household has 4 people or more, your annual income has to be less than $105,140.

The purchase price limits are different based on location. If a home is located in a “targeted area” than the purchase price for a single family home (or condo) is $451,000. An example of a “targeted area” would be Ukrainian Village, West Loop, Uptown, and Hyde Park. If the property does not fall into a “targeted area” the purchase price limit is $369,000. There are higher purchase price limits for 2, 3 & 4 unit properties.

If your mortgage banker doesn’t know about this program, you are working with the wrong person. Don’t leave free money on the table, TaxSmart could put tens of thousands dollars in your pocket.

For more information on this program, contact McKenzie Dhyr-Arnold at mckenzieda@gmail.com

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