Fillable Form 8396

What is Form 8396?

Form 8396, Mortgage Interest Credit, is a form used by taxpayers to claim a tax credit for mortgage interest payments under a Mortgage Credit Certificate (MCC) program. This program is designed to help low-to-moderate income individuals afford homeownership by allowing them to claim a portion of their mortgage interest as a direct credit against their federal income tax liability. It is not a deduction, but a credit, which can directly reduce the amount of tax you owe. The MCC is issued by a state or local government agency and typically applies to first-time homebuyers.

To utilize the Mortgage Credit Certificate program effectively, you must obtain a qualified mortgage credit certificate from your local governmental unit, which provides specific tax information relevant to your tax year. If there is any unused credit in your current tax year, you can carry forward this credit into the following year, allowing you to maximize the benefits across up to nine years. It's important to note that this benefit is not transferable to a related person, ensuring the tax credit supports the original recipient intended by the program’s guidelines.

How do I fill out Form 8396?

A fillable copy of Form 8396 can be found here.

Name Shown on Tax Return

Enter the name that is recorded on your tax return.

Social Security Number

Enter your social security number.

Address

Enter the address of your main home to which the qualified mortgage certificate relates if it is different from the address shown on your tax return.

Name of Issuer of Mortgage Credit Certificate

Enter the name of the issuer of your MCC.

Mortgage Credit Certificate Number

Enter your MCC Number.

Issue Date

Enter the date that your MCC was issued.

Part I - Current Year Mortgage Interest Credit

For each of the following lines, enter the following values as requested.

1. Interest paid on the certified indebtedness amount. If someone else also held an interest in the home, enter only your share of the interest paid.
2. Enter the certificate credit rate shown on your MCC. Do not enter the interest rate on your home mortgage.
3. If Line 2 is 20% or less, multiply Line 1 by Line 2 and enter the product. If Line 2 is greater than 20%, or you refinanced your mortgage and received a reissued certificate, see the instructions on the second page of this form to determine the amount that should be entered here.
   1. Reduce the deduction for home mortgage interest on Schedule A (Form 1040) by the amount on line 3.
4. Enter any 2020 credit carryforward from Line 16 of your 2022 Form 8396.
5. Enter any 2021 credit carryforward from Line 14 of your 2022 Form 8396.
6. Enter any 2022 credit carryforward from Line 17 of your 2022 Form 8396.
7. Add Lines 3 through 6 and enter the sum.
8. Enter the amount from Line 3 of the Credit Limit Worksheet provided in the instructions.
9. Enter the smaller value between Line 7 and Line 8. Enter this mount on Line 6g of Schedule 3 (Form 1040) as well.

Part II - Mortgage Interest Carryforward

Enter the following values in the corresponding lines.

10. Add Lines 3 and 4 and enter the sum.
11. Enter the amount on Line 7.
12. Enter the larger amount between Line 9 and Line 10.
13. Subtract Line 12 from Line 11 and enter the difference.
14. Enter the smaller value between Line 6 and Line 13.
15. Subtract Line 14 from Line 13 and enter the difference.
16. Enter the smaller value between Line 5 and Line 15.
17. Subtract Line 9 from Line 3 and enter the difference. If the difference is zero or less, enter 0.

Credit Limit Worksheet

Enter the following values in the corresponding lines.

1. Enter the amount from Form 1040, 1040-SR, or 1040-NR, Line 18
2. Enter the total of all amounts (if any) from Form 1040 or 1040-SR, Line 19; Schedule 3 (Form 1040), Lines 1 through 4, 6d, 6f, 6l, and 6m; and Form 5695, Line 32
3. Subtract Line 2 from Line 1 and enter the difference. If the difference is zero or less, enter 0 here and on Form 8396, Lines 8 and 9, and Part II of Form 8396

Frequently Asked Questions (FAQs)

Who is eligible to file Form 8396?

You must have a Mortgage Credit Certificate (MCC) issued by a state or local government to be eligible. Typically, this program is for first-time homebuyers or those who meet certain income and homeownership criteria.

What is a Mortgage Credit Certificate (MCC)?

An MCC is a certificate provided by local or state housing agencies that allows qualifying homeowners to claim a credit for a portion of their mortgage interest. It is generally available to low-to-moderate income buyers to make homeownership more affordable.

How does the Mortgage Interest Credit differ from a mortgage interest deduction?

The mortgage interest credit is a direct credit against your federal tax liability, reducing the amount of tax you owe. A mortgage interest deduction, on the other hand, reduces taxable income, which can lower your tax bill indirectly.

What is the maximum amount of credit you can claim using Form 8396?

The maximum credit you can claim is $2,000 per year if your MCC credit rate exceeds 20%. If the credit is lower than 20%, there is no set cap.

How do you determine the credit amount using Form 8396?

The credit is determined based on the percentage listed on your MCC and the amount of mortgage interest paid during the year. This calculation is detailed in the instructions on Form 8396.

Can you claim the mortgage interest credit if you refinance your mortgage?

If you refinance, you must obtain a reissued MCC to continue claiming the credit. The reissued MCC will reflect the terms of the new loan.

How long can you claim the mortgage interest credit?

You can claim the credit for the life of the mortgage, provided that your MCC remains valid and the home is your primary residence. If you sell or stop using the home as your primary residence, the credit ends.

Can unused mortgage interest credit be carried forward?

Yes, if the credit exceeds your tax liability for the year, the unused portion can be carried forward for up to three years. Form 8396 allows you to track these carryforward amounts.

What information do you need to complete Form 8396?

You will need your MCC number, the credit rate, and the total amount of mortgage interest paid during the year. The form requires specific details from your MCC.

Can you file Form 8396 if you don’t have an MCC?

No, you must have a valid Mortgage Credit Certificate to file Form 8396. Without the MCC, you cannot claim the mortgage interest credit.

What happens if you stop using the property as your main home?

If the property ceases to be your main home, you can no longer claim the mortgage interest credit. You must report this change and stop using Form 8396.

Can Form 8396 be filed electronically?

Yes, Form 8396 can be filed electronically along with your federal tax return. Many tax software programs include this form in their filing options.

Is there an income limit to claim the mortgage interest credit on Form 8396?

Yes, income limits vary by location and program guidelines for the MCC, as it is designed to benefit low-to-moderate income homebuyers. These limits are set by the issuing government agency.

What should you do if your MCC is lost?

You should contact the agency that issued the certificate to get a replacement. The MCC is necessary to claim the credit on Form 8396.

Can you claim Form 8396 if you are a co-borrower on a mortgage?

Yes, you can claim the credit as a co-borrower if your name is on the MCC and you paid part of the mortgage interest. Each qualifying borrower can claim their portion of the credit.

Is the mortgage interest credit refundable?

No, the mortgage interest credit is not refundable. It can only reduce your tax liability to zero, and any excess credit can be carried forward.