A Homeownership Perk – Year After Year
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SD Housing Tax Credit (MCC)
The Mortgage Credit Certificate Tax Credit helps eligible homebuyers reduce the federal income taxes they pay year after year — putting more money back in their pocket while owning their home.
What is the SD Housing Tax Credit (MCC)?
Buying your first home comes with many expenses, but the SD Housing Tax Credit, available through a Mortgage Credit Certificate (MCC), can help make homeownership more affordable long after closing. The MCC Program provides eligible first-time South Dakota homebuyers with a federal tax credit that can reduce the amount of taxes owed each year.
Unlike a tax deduction, which only lowers taxable income, the MCC offers a dollar-for-dollar reduction in your federal tax liability. That means eligible homeowners may save up to $2,000 annually for the life of their loan, potentially adding up to tens of thousands of dollars in long-term savings.
How Does the Mortgage Credit Certificate Program Work?
An MCC allows qualified homebuyers to claim a portion of their annual mortgage interest as a federal tax credit. South Dakota’s program offers one of the highest credit rates available, allowing eligible borrowers to claim up to 50% of their mortgage interest annually, capped at $2,000 per year. Any remaining mortgage interest may still qualify as a standard mortgage interest deduction, creating a valuable “double benefit” for homeowners.
Who Qualifies for a Mortgage Credit Certificate?
The MCC Program is designed for first-time homebuyers, though eligibility may extend beyond that definition in some cases.
You may qualify if:
1.
You have not owned a primary residence in the past three years
2.
Your household income falls within South Dakota Housing Income Limits.
4.
The home will serve as your primary residence
3.
The home purchase price meets the program guidelines
The maximum home sale price does not exceed the current purchase price limit of $410,000, or if the home is located in a federally designated target area, $460,000
Work with a Participating Lender
To receive an MCC, you must apply through an SD Housing-approved participating lender at the same time you apply for your mortgage. MCCs cannot be added after closing, making early planning essential.
Applying for a Mortgage Credit Certificate
Once you’ve selected a participating lender, they will guide you through the application process and submit the MCC paperwork on your behalf.
Typical documentation includes:
Recent federal tax returns
Current pay stubs
Completed MCC application forms
A signed purchase agreement
A one-time MCC fee is typically collected at closing. Because the certificate must be issued before or at closing, it’s important to complete all required steps early in the homebuying process.
Claiming Your Tax Credit
After closing, homeowners claim the MCC each year by filing IRS Form 8396 with their federal tax return.
The credit is non-refundable, meaning it can reduce your tax liability to zero. If you are unable to use the full credit in one year, unused portions may be carried forward for up to three years.
Some homeowners also choose to adjust their paycheck withholdings to benefit from the savings throughout the year instead of waiting until tax season.
Why Homebuyers Use the SD Housing Tax Credit Program?
The SD Housing Tax Credit MCC Program helps eligible buyers:
Reduce annual federal taxes
Increase long-term affordability
Maximize first-time homebuyer benefits
Keep more money available for savings, maintenance, or other financial goals
Over the life of a mortgage, the savings can be significant — making the MCC one of South Dakota’s most valuable resources for first-time homebuyers.
Frequently Asked Questions
Our Mortgage Credit Certificate (MCC) FAQs are here to help you better understand how the SD Housing Tax Credit Program works, who may qualify, and how to apply. You'll find answers to common questions about eligibility, tax savings, participating lenders, eligible loan types, and combining the program with other SD Housing homebuyer assistance programs. If you don't see your question listed, a participating SD Housing lender can help guide you through the program and determine whether it's a good fit for your homebuying journey.
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The SD Housing Tax Credit is a Mortgage Credit Certificate (MCC) that helps eligible first-time homebuyers reduce the amount of federal income tax they owe. It allows a portion of the mortgage interest paid each year to be claimed as a dollar-for-dollar tax credit.
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The MCC allows qualified homebuyers to claim a percentage of their annual mortgage interest as a federal tax credit, helping lower their yearly tax bill and increase disposable income.
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The Mortgage Credit Certificate is a tax credit, not just a tax deduction. A tax credit directly reduces the amount of federal income tax you owe.
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The Mortgage Credit Certificate Program is available to eligible first-time homebuyers purchasing a primary residence in South Dakota through a participating lender. Income limits, purchase price limits, and other eligibility requirements apply.
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Yes. In most cases, applicants cannot have owned a home within the previous three years to qualify for the Mortgage Credit Certificate Program.
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Yes. The Mortgage Credit Certificate Program is offered as an enhancement to SD Housing’s First-Time Homebuyer Program and may be combined with eligible loan products.
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In many cases, yes. Eligible homebuyers may be able to combine the Mortgage Credit Certificate Program with SD Housing downpayment assistance programs through participating lenders.
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The amount of savings depends on your loan amount, mortgage interest paid, and tax situation. Eligible homeowners may receive up to $2,000 annually in federal tax savings.
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Potentially. Some lenders may consider the estimated tax savings from the Mortgage Credit Certificate when reviewing your loan application and purchasing power.
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The Mortgage Credit Certificate may be used with several loan types, including Conventional, FHA, USDA Rural Development, and VA loans through participating lenders.
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No. The Mortgage Credit Certificate cannot be used for refinance transactions or to pay off an existing mortgage, except in limited qualifying situations.
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Yes. The SD Housing Mortgage Credit Certificate includes a $250 Tax Credit Fee.
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Eligible homeowners may continue claiming the Mortgage Credit Certificate tax credit each year for as long as they occupy the home as their primary residence and maintain the original mortgage.
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Homebuyers can apply through a participating SD Housing lender when applying for a mortgage loan.
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A list of participating lenders is available through South Dakota Housing or by contacting a participating lender familiar with SD Housing programs.
Connect with a participating lender to learn if the SD Housing MCC Tax Credit could help make your first home more affordable.
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