A Texas Mortgage Credit Certificate (MCC) turns part of the mortgage interest you pay each year into a federal tax credit. TSAHC's MCC and TDHCA's MCC Combo are currently issued at a 15% credit rate, and at that rate the IRS's $2,000 annual cap doesn't apply. You claim the credit each year on IRS Form 8396.
I'm Taylor Ring, a Mortgage Loan Officer with Fairway Independent Mortgage Corporation (The Wood Group) in Belton. I'm not a tax professional, and an MCC is a tax benefit, so please run your own situation by one. What I can do is explain how the two Texas MCC programs work, what they cost, and what to ask before you choose.
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How an MCC Works
A deduction lowers your taxable income. A credit lowers the tax itself, dollar for dollar. According to IRS Form 8396:
- Your credit equals the interest you paid on the certified loan amount × the certificate credit rate.
- The IRS allows credit rates from 10% to 50%. Texas issuers currently use 15%.
- Only a qualified MCC issued by a state or local governmental unit counts, and the home must be your main home within the issuer's area.
Hypothetical example: Say you pay $10,000 in mortgage interest on your certified loan in a year. At 15%, your MCC credit would be $1,500. Round illustrative numbers only, not tax advice. Your actual interest, tax liability, and credit will differ.
Why There's No $2,000 Cap in Texas
You may see "$2,000 maximum" in articles about MCCs. Under Form 8396, that cap applies only when the credit rate is more than 20%. At 20% or less, there's no $2,000 cap. TSAHC's own MCC FAQ says its MCCs have "no maximum benefit of $2,000," and TDHCA's 15% Combo rate falls under the same rule.
The Form 8396 Mechanics
Here's what happens at tax time, in plain terms:
- You file Form 8396 with your federal return each year you claim the credit.
- Your mortgage interest deduction shrinks. If you itemize, you reduce your Schedule A mortgage interest deduction by the amount of the credit. In the hypothetical above, $10,000 of interest would become an $8,500 deduction.
- Unused credit carries forward. If your credit is more than your tax liability, you can carry the unused part forward for up to 3 tax years or until it's used, whichever comes first.
- Refinancing can end it. The credit survives a refinance only if the MCC is reissued and meets IRS conditions.
- Selling early may trigger recapture. If you sell within 9 years, you may have to repay part of the credit (IRS Form 8828 and Publication 523).
Hypothetical carryforward example: If your credit is $1,500 but your federal tax liability is only $1,000, the extra $500 could carry forward to the next year. Round illustrative numbers only, not tax advice.
TDHCA Texas Mortgage Credit Certificate
TDHCA offers its MCC two ways:
- Combo: paired with a TDHCA My First Texas Home first mortgage. See my My First Texas Home guide.
- Standalone: alongside a first mortgage from another source, with its own rules.
Standalone Rules
- No minimum credit score for the MCC itself
- Can't be combined with a first lien from a bond issuer, or with outside down payment assistance or subsidy
- No temporary buydowns and no FHA 203(k) loans
- TDHCA says "supplies are limited"
TDHCA's daily Rate Notice lists 15% for the Combo. Check the TDHCA Rate Notice for the current credit rate on both options.
TDHCA Eligibility
- First-time buyer: no owned-and-occupied primary residence in the last 3 years. Waived for qualified veterans (DD-214) and homes in Qualified Targeted Census Tracts.
- Income and purchase price limits shared with My First Texas Home (for example, $101,500 for a 1-2 person household in Bell County, non-targeted)
- HUD-certified homebuyer education for all borrowers
- Move in within 60 days; Texas property
The credit lasts for each year you keep the loan and live in the home as your principal residence.
TSAHC Mortgage Credit Certificate
TSAHC's MCC works differently:
- 15% credit rate, down from 20% on April 1, 2024, with no $2,000 maximum
- No standalone option. Since November 1, 2023, a TSAHC MCC must be paired with a TSAHC Non-Bond DPA loan or the No-DPA loan. It can't be used with Bond DPA.
- First-time buyer: no ownership interest in a principal residence in the prior 3 years for the borrower, spouse, and any adult on the Deed of Trust. Waived in Targeted Areas and for a "Qualified Veteran" under 38 U.S.C. 101. Active-duty service members don't count as Qualified Veterans for this waiver.
- Household income counts everyone on the deed plus a non-purchasing spouse, and purchase price limits apply
- Two ways to use it: claim it at tax time, or adjust your W-4 withholding to see the benefit monthly
Teachers, first responders, and veterans: the $400 issuance fee is waived when you use TSAHC Non-Bond DPA with the MCC. See my Homes for Texas Heroes guide.
TDHCA vs. TSAHC MCC Side by Side
| Feature | TDHCA Texas MCC | TSAHC MCC |
|---|---|---|
| Credit rate | 15% (Combo, per Rate Notice) | 15% |
| $2,000 cap | No (rate is 20% or less) | No |
| Standalone option | Yes | No, discontinued Nov 1, 2023 |
| Issuance fee | $400 Combo; $1,000 Standalone (military options waived) | $400; waived for Heroes using DPA |
| Other fees | $225 compliance review | TSAHC program fees: $250 funding, $85 tax service, $200 compliance review |
| Veteran waiver of first-time rule | Qualified veterans (DD-214) | Qualified Veterans under 38 U.S.C. 101 (not active duty) |
Sources: TDHCA Texas MCC program, TDHCA Standalone MCC Matrix (Aug 2026), TSAHC MCC FAQ, and TSAHC Guidelines (Sept 9, 2026).
Recapture: What Happens If You Sell
Recapture sounds scary, but it only applies in specific situations. For a TSAHC MCC, the recapture tax applies only on a sale within 9 years, and it's the lesser of 50% of your gain or a formula amount. Exemptions include:
- No gain on the sale
- Income that didn't grow enough to trigger it
- Selling after year 9
- A sale due to death or divorce
TDHCA's MCC and My First Texas Home loans may also be subject to recapture. Your lender will give you a recapture notice, and a tax professional can tell you what it could mean for you.
Is an MCC Worth It for You?
It can be, especially if you'll stay in the home a while and have enough federal tax liability to use the credit. The fees, the reduced interest deduction, and the recapture rules all go on the other side of the scale. This is the part where a tax professional earns their fee.
Frequently Asked Questions
How much is a Texas mortgage credit certificate worth?
The credit equals the mortgage interest you pay on the certified loan amount multiplied by the credit rate. TSAHC and TDHCA's MCC Combo currently use a 15% credit rate, so the value depends on how much interest you pay and your federal tax liability.
Is there a $2,000 cap on a Texas MCC?
No. Under IRS Form 8396, the $2,000 cap applies only when the credit rate is more than 20%. Texas MCCs are currently issued at 15%, and TSAHC says its MCCs have no maximum benefit of $2,000.
Can I get a TSAHC MCC without a TSAHC loan?
No. TSAHC discontinued its standalone MCC on November 1, 2023. A TSAHC MCC must be paired with TSAHC Non-Bond DPA or its No-DPA loan. TDHCA still offers a standalone MCC, and TDHCA says supplies are limited.
Do I have to repay an MCC if I sell my home?
You may owe recapture tax if you sell within 9 years. Exemptions include having no gain, insufficient income growth, selling after year 9, or a sale due to death or divorce. A tax professional can review your situation.
Can veterans get a Texas MCC if they have owned a home before?
In many cases, yes. TDHCA waives the first-time buyer rule for qualified veterans with a DD-214. TSAHC waives it for Qualified Veterans under 38 U.S.C. 101, but active-duty service members do not count as Qualified Veterans for that waiver.
Let's See If an MCC Belongs in Your Plan
I'll show you how an MCC fits with your loan and assistance options, and I'll give you what you need to take to your tax professional.
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Related Guides
- My First Texas Home Down Payment Assistance
- Homes for Texas Heroes Program
- Texas First-Time Home Buyer Programs
- Down Payment Assistance in Texas
- VA Loans in Texas
- FHA Loan Limits in Texas
Taylor Ring, NMLS #2809683 | Fairway Independent Mortgage Corporation, NMLS #2289 | The Wood Group of Fairway, 127 Lake Rd Ste 300, Belton, TX 76513 | Equal Housing Opportunity. This is not a commitment to lend. All loans are subject to credit approval and program guidelines, and approval, rates, and program availability are not guaranteed. This article is general information, not tax advice; consult a qualified tax professional. Not affiliated with or endorsed by the IRS, TDHCA, TSAHC, or any government agency.