Form 8396: Mortgage Interest Credit

What Is Form 8396: Mortgage Interest Credit?

Form 8396 is an Internal Revenue Service (IRS) form used by homeowners to claim the mortgage interest credit. The aim of the mortgage interest credit is to help lower-income taxpayers afford homeownership. You can only claim the credit if you receive a mortgage credit certificate (MCC) from a state or local government agency.

Who Can File Form 8396: Mortgage Interest Credit?

Anyone who was issued an MCC from a state or local government agency should file this form. In general, an MCC is only issued to lower- and moderate-income individuals in connection with a new mortgage to buy a primary residence. An MCC is issued under a qualified mortgage credit certificate program.

Individuals who qualify can claim the credit each year using Form 8396 for part of the home mortgage interest paid.

How to File Form Form 8396: Mortgage Interest Credit

The filer of Form 8396 must include details, including their name, the name of the issuer of the MCC, the certificate number and issue date, and their Social Security Number on the form.

Under Part I, the filer must figure out the current year's mortgage interest credit. The MCC will show the rate you will use to figure out your credit.

The IRS limits the mortgage interest credit to a maximum of $2,000 per year. Part II is used to determine the following year's carryforward credit.

Form 8396 is available on the IRS website.

Once the form is completed attach it to your individual federal income tax return — Form 1040, Form 1040-SR, or Form 1040-NR.

If you have any unused credit to carry forward, keep a copy of Form 8396 to figure out your credit for the following year.

Special Considerations When Filing Form 8396: Mortgage Interest Credit

There are some restrictions associated with the credit. The residence must meet specific price and value requirements relative to the local housing market. The home connected to the issued certificate must be in the same jurisdiction as the issuing agency. The property must be the tax filer's primary residence.

In addition, taxpayers who itemize their deductions on Schedule A must offset the amount of their deduction for mortgage interest by the amount of the credit claimed.

A new mortgage credit certificate is issued if the mortgage is refinanced, and homeowners who sell their residence within nine years may have to repay some of the credit issued.

Form 8396: Mortgage Interest Credit vs. Form 1098: Mortgage Interest Statement

Form 8396: Mortgage Interest Credit is different from Form 1098: Mortgage Interest Statement. Form 1098 shows the amount of interest and related expenses paid on a mortgage during the tax year and is sent out by banks and financial institutions. The loan interest shown on the MCC is usually the same amount in Box 1 of Form 1098.