Your source for expert information on housing in South Dakota

2022 Public Notice to Qualified Homebuyers




The South Dakota Housing Development Authority (“Authority”) is proposing to implement a program for Mortgage Credit Certificates (“MCCs”) in South Dakota (the “MCC Program”). MCCs are a form of federal income tax credits for qualified homebuyers. No sooner than 90 days following this Notice, the Authority may issue MCCs to qualified homebuyers in South Dakota according to the guidelines noted below.

Purchasers of new or existing single‑family homes located in South Dakota may apply for an MCC through participating lenders when they apply for financing from the lender for the purchase. An MCC cannot be issued in connection with a mortgage loan that refinances or pays off an existing mortgage or land contract (except for certain construction period and temporary loans) or with a mortgage loan provided from proceeds of tax‑exempt bonds.

The amount of the credit will be 10-50% of the yearly interest paid or accrued on a qualified mortgage. If the credit allowable under the MCC Program for any taxable year exceeds the qualified homebuyer’s tax liability for such taxable year, then such excess credit may be carried over to each of the three succeeding taxable years and, subject to certain limitations, may be added to the credit allowable under the MCC Program for that succeeding year. The qualified homebuyer may reduce the amount of monthly federal income tax withheld by filing a revised IRS W‑4 Employee’s Withholding Allowance Certificate in order to have more disposable income with which to make loan payments. Use of the credit will reduce the deduction for home mortgage interest on the homebuyer’s federal income tax return.

To be eligible for an MCC, homebuyers must meet certain federal income tax requirements, including: 

  1. The homebuyer’s gross annual household income may not exceed certain limits, which currently range from $75,500 to $96,300 for one‑ or two‑person families, and from $86,825 to $110,745 for three‑or‑more‑person families, and which limits must be reviewed at least annually and may be revised by the Authority at any time. Gross annual household income is the total of all income, from whatever source, of all persons age 18 and older who will reside or who intend to reside in the residence.
  2. The maximum purchase price limits for homes (as established by the Authority) currently range from $300,000 to $366,000, and which limits must be reviewed at least annually and may be revised by the Authority at any time.
  3. Qualified homebuyers must occupy the residence as their principal residence within 60 days after it is financed by a participating lender. The MCC will expire on the date that the residence ceases to be the principal residence of the qualified homebuyer.
  4. Qualified homebuyers must not have had an ownership interest in a principal residence within the preceding three years, except for qualified homebuyers purchasing homes in federally designated targeted areas or certain qualified Veterans.
  5. No more than 15% of the residence being purchased can be used in a trade or business used in accordance with the Internal Revenue Code.

Current federal tax law may require a payment to the federal government of a capital gains “recapture” tax if the homebuyer sells or otherwise transfers his or her home to someone else within nine years after the MCC is issued, but not to exceed 50% of the gain realized on the sale or transfer of the home. The recapture tax represents a portion of the “federally subsidized amount” of the mortgage loan, calculated in accordance with federal tax law. The homebuyer may not have to pay part or all of the recapture amount if his or her income, at the time of the sale or transfer, is less than a prescribed amount at the time of sale or transfer.

The total credit election amount of the MCC Program is $63,811,652. Purchasers may obtain an MCC in connection with financing from any lender, including banks, savings and loan associations, mortgage banking firms and credit unions. MCC applications will be accepted on a first‑come, first‑served basis. A list of participating lenders is available to the public from the undersigned. There is no allocation of MCCs by lender; however, for the first year of the MCC Program, 20% will be set aside for mortgage loans on residences in targeted areas.

Homebuyers must be qualified for an MCC pursuant to the Code and the guidelines, rulings and interpretations issued by the Internal Revenue Service which shall control in the event of a conflict with other requirements; the applicant must sign all documents and affidavits which are needed to demonstrate the homebuyer’s eligibility for an MCC. The homebuyer must meet the credit and underwriting criteria established by the participating lender who provides the mortgage loan. The Authority itself does not originate mortgage loans in connection with MCCs.

For more information on the MCC Program or for a copy of the participating list of lenders, contact the South Dakota Housing Development Authority, 3060 East Elizabeth Street, Pierre, South Dakota 57501 or call (605) 773-3181.

Topics: Latest News

Subscribe to Our Housing Newsletter

Recent Posts

Free Home Buyers Guide Download