Q: Who is FHR?
A: Family Housing Resources, Inc. (FHR) is a non-profit organization formed to create housing opportunities for low and moderate income households.  The Industrial Development Authorities have contracted with FHR to administer their Mortgage Credit Certificate Programs.  A Mortgage Credit Certificate allows the homeowner to take a tax credit each year for the life of their mortgage loan.

Q: How does the tax credit work?
A. The tax credit reduces your federal income tax liability.  For instance, if your tax credit is 20% of the interest paid on your home loan, and if your loan amount was $100,000.00 and your interest rate was 6%, the interest you would pay in the first year would be $6,000.00.  Your tax credit would be 20% of that amount, or $1,200.00.  (See example below.)

 The credit can be used to reduce the amount you owe, provide a refund, or you can adjust your withholding allowance, resulting in more take home pay. To determine the best course of action for your tax situation, it is highly recommended you speak to your tax preparer or accountant.  In order to claim your credit, you need to obtain a 1098 Form from the mortgage company servicing your loan, and IRS Form 8396.

Q: I know I can claim 80% of my mortgage interest payment as a deduction on my federal taxes but what about my state taxes?
A. You may use 100% of your mortgage interest payment when calculating your state taxes.

Q: What if I don't pay taxes?
A. You must have a tax liability to take the credit.  If you do not have a tax liability now, you may have one in the future.  In addition, if you owe no taxes, or the credit is greater than your taxliability, you may carry the tax credit forward for three years.

Q: Why is there an annual fee, what is it for?
A. Files for borrowers who have received Mortgage Credit Certificates must be maintained and serviced for the life of the loan.  This includes reporting required by the IRS and the Industrial Development Authorities for revocations and reissuances.  Annual fees pay for the overhead and ongoing administration of these files.

Q: Why is my annual fee more this year?
A. Your annual fee may be more this year because the annual fee is prorated the first year depending on the tax quarter in which your certificate was issued.

Q: What if I lose my job or have other financial problems that make it impossible for me to pay my annual fee?
A. If you have financial hardships which make it difficult to pay your fee, please call our office at 1-800-622-7462 to make special arrangements.

Q: If I do not receive a tax benefit in a particular year, must I still pay the annual fee?
A. If you can provide documentation that you did not receive a tax credit because you had no tax liability, the annual fee can be waived for that year, but you must contact FHR for a waiver.

Q: If I rent my house, can I still claim the credit on my tax return?
A. According to Section 280A of the Internal Revenue Code, as amended, in order to claim the credit on your tax return, you must be the principal resident.  If the residence ceases to be your principal residence, the certificate will be revoked.  In addition, the residence cannot be used as an investment property, vacation home, or recreational home and not more than 15% of the area can be used on a regular basis in a trade or business.

Q: What happens if I refinance my home?
A. As of December 1993, IRS has made provisions to allow for refinancing.  If you have refinanced your loan, you must call FHR at 1-800-622-7462, and request the refinancing paperwork.  It is mandatory that this paperwork is completed.  If it is not, the certificate holder will lose the tax credit.

Q: How will a home improvement loan or second mortgage affect my tax credit?
A. A home improvement loan or second mortgage does not affect the tax credit.  However, when figuring your taxes at the end of the year, IRS will only allow you to take 20% of the interest you paid on the original mortgage, and not on a home improvement loan or second mortgage.

Q: If I sell my house, will I owe anything?
A. If you sell your house within nine years, you may be subject to a recapture tax.  Recapture applies only if you meet both of the following conditions:

IRS Form 8828 must be completed and filed with your tax return for the year in which the house was sold.

Q: How is the recapture calculated?
A. To calculate the recapture you must have IRS Form 8828 and Exhibit G, The Method to Compute Recapture Tax.  You may contact our office at 1-800-622-7462 to receive either of these items.  The recapture tax is the LESSER of (1) 50% of your gain on the sale of the home, or (2) your RECAPTURE AMOUNT which is determined by multiplying the following three numbers:

Q: Do I need to notify FHR if I sell my house?
A: The Mortgage Credit Certificate states that you agree to notify Family Housing Resources, Inc. in writing within 60 days after the Residence ceases to be your principal residence.

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