Guide · Ohio

Is OHFA's Mortgage Tax Credit worth it, and what is the recapture tax?

OHFA's Mortgage Tax Credit can cut your federal tax bill by up to $2,000 a year. How MTC Plus and MTC Basic differ, what the cap really means, and who could face the recapture tax.

Short answer

For many buyers, yes. The credit turns 15% to 40% of your mortgage interest into a direct cut in federal tax, up to $2,000 a year. MTC Plus pairs with an OHFA loan; MTC Basic works with other lenders' loans. The recapture tax only hits people who sell within nine years, at a gain, with income above a set limit.

The short version

A tax deduction lowers the income you're taxed on. A tax credit lowers the tax itself, dollar for dollar. OHFA's Mortgage Tax Credit, a mortgage credit certificate in federal terms, is a credit. Most first-time buyers take the standard deduction and get nothing for their mortgage interest. A credit works for them anyway.

Plus vs. Basic

OHFA offers two versions:

	MTC Plus	MTC Basic
Paired with	An OHFA first mortgage	Another lender's loan product
Credit rate	40% of mortgage interest	20% in target areas, 15% elsewhere
Annual cap	$2,000	$2,000
Down payment help	Can be paired with OHFA DPA	Not an OHFA loan, so no OHFA DPA
Catch	May come with a slightly higher interest rate	No credit score minimum or education requirement

One open question for Ohio Heroes buyers: OHFA's materials don't say whether the hero rate can be combined with MTC Plus. Its program-combination graphics show Ohio Heroes with down payment assistance, not with the tax credit. Ask an OHFA-approved lender to price both setups.

What the $2,000 cap means in practice

The cap is what most people miss. Here's an illustrative example:

A $200,000 loan at about 6.5% pays roughly $13,000 of interest in year one.
MTC Plus at 40% would be $5,200, but the cap holds it to $2,000.
MTC Basic at 15% would be about $1,950, just under the cap.

On a loan that size, the Basic version gets you nearly the same credit as Plus, without the possible rate bump. On a smaller loan, say $120,000, the 40% rate starts to matter: about $7,800 of interest times 40% still hits the cap, while 15% gives about $1,170.

A credit only helps if you owe federal income tax. If your tax bill is already low, a $2,000 credit may be more than you can use in a year. Ask a tax preparer how your return would look before you pay for a higher rate to get Plus.

The rate matters more than people think. A slightly higher rate on MTC Plus costs you every month for as long as you keep the loan. The credit lasts only as long as the certificate applies to that loan. Compare the two over the years you expect to stay.

Availability

OHFA's tax credit page carried a hidden note about a pause from September 3 to October 1, 2026, while the program itself showed as available. Credits like this are limited by federal allocation. Confirm it's open when you apply.

The recapture tax: who actually owes it

Buyers hear "recapture" and panic. Here's the IRS rule from the Form 8828 instructions. You owe the tax only if all three of these are true:

You sell or dispose of the home within nine years of buying it. Refinancing without selling doesn't count.
You sell at a gain. No gain, no tax.
Your income in the year of sale is above the limit in the notice your lender or the bond issuer gave you at closing. At or under it, no tax.

It applies to buyers who had a federal mortgage subsidy: a mortgage credit certificate, or a below-market loan financed by qualified mortgage bonds. OHFA's loans are bond-funded, so if you take Ohio Heroes or MTC Plus, expect a recapture notice in your closing papers. Read it. It lists the income limits that would apply in each year.

How big can it get?

The maximum is 6.25% of the highest subsidized loan amount, then scaled down by how long you held the home and how far your income is over the limit. It is also capped at half your gain. You figure it on Form 8828 with your federal return for the year you sell.

In plain terms: you'd need to sell fast, at a profit, after a big raise. A teacher who stays put, sells at year ten, or sells at a loss owes nothing. Giving the home to a spouse in a divorce doesn't trigger it either. Gifting it to someone else counts as a sale.

This isn't the same as repaying the down payment help

OHFA's 7-year down payment payback and the 9-year federal recapture tax are separate. One is a loan you repay to OHFA if you sell early. The other is an IRS tax that most sellers never owe. See our payback guide for the first.

Questions to ask before you choose

What rate do I get on an OHFA loan with MTC Plus, and what rate without it?
What rate would I get from your regular loan with MTC Basic?
How much interest will I pay in the first year on each, and does either hit the $2,000 cap?
Can I still get OHFA's down payment help with the option you're recommending?
Is the credit open right now, and what's the fee to get the certificate?
Which income limits are printed on my recapture notice?

Write the answers down side by side. The cheapest option is the one with the lowest total cost over the years you plan to stay, after the credit, not the one with the biggest percentage on the flyer.

Bottom line

The credit is real money for many Ohio buyers, especially on smaller loans. Run the cap math, compare the rate, and keep the recapture notice. Then check your eligibility to see which OHFA options fit your income and county.

Reader questions

How much is OHFA's Mortgage Tax Credit worth?

Up to $2,000 a year. MTC Plus credits 40% of mortgage interest with an OHFA loan; MTC Basic credits 20% in target areas and 15% elsewhere with another lender's loan.

Can I use the Mortgage Tax Credit with Ohio Heroes?

OHFA's materials don't say. Its program-combination graphics show Ohio Heroes with down payment assistance but not with the credit. An OHFA-approved lender can tell you.

Will I have to pay the recapture tax if I sell?

Only if you sell within nine years, at a gain, with income above the limit in your closing notice. If any one of those isn't true, you owe nothing. The tax is also capped at half your gain.

Does refinancing trigger the recapture tax?

No. Per the IRS Form 8828 instructions, refinancing without selling doesn't trigger it.

Free printable: the Ohio homebuyer paperwork checklist. Papers, steps, programs and lender questions in two printed pages. Get the sheet