What Is Form 8396: Mortgage Interest Credit?
I'm here to explain Form 8396, which is an IRS form you use to claim the mortgage interest credit. This credit helps lower-income taxpayers like you afford owning a home. You can only claim it if you've got a mortgage credit certificate (MCC) from a state or local government agency.
With Form 8396, if you have that MCC, you claim the credit for part of the mortgage interest you pay each year. It's designed for lower- and moderate-income homeowners to cut down on homeownership costs. Remember, the IRS caps this credit at a maximum of $2,000 annually.
Who Can File Form 8396?
You can file Form 8396 if you've been issued an MCC from a state or local government agency. These certificates typically go to lower- and moderate-income people buying a primary residence with a new mortgage, under a qualified program.
If you qualify, you claim the credit each year on Form 8396 for part of your home mortgage interest paid.
How to File Form 8396
To file Form 8396, you need to provide details like your name, the issuer of the MCC, the certificate number and issue date, and your Social Security Number.
In Part I, you calculate the current year's mortgage interest credit using the rate from your MCC. The credit is limited to $2,000 per year by the IRS. Part II figures out any carryforward credit for the next year. Once done, attach it to your Form 1040, 1040-SR, or 1040-NR.
You can find Form 8396 on the IRS website. If you have unused credit to carry forward, keep a copy of the form for next year's calculations.
Special Considerations When Filing Form 8396
There are restrictions with this credit. The residence has to meet price and value requirements based on the local housing market. It must be in the same jurisdiction as the issuing agency, and it has to be your primary residence.
If you itemize deductions on Schedule A, you offset your mortgage interest deduction by the credit amount claimed. If you refinance, you get a new MCC and can keep claiming if you qualify. But if you sell within nine years, you might have to repay some of the credit.
Form 8396: Mortgage Interest Credit vs. Form 1098: Mortgage Interest Statement
Don't confuse Form 8396 with Form 1098. Form 1098 is the statement from your bank showing interest and expenses paid on your mortgage for the year. The interest on your MCC usually matches Box 1 on Form 1098.
Common Questions About Form 8396
Can you claim the mortgage interest credit without an MCC? No, you must have one from a state or local agency.
What if you refinance? Yes, a new MCC is issued, and you can claim if you still qualify.
Do you need to file every year? Yes, file Form 8396 annually if you qualify to claim the credit for interest paid.
The Bottom Line
Form 8396 gives lower- and moderate-income homeowners a way to lower homeownership costs through a mortgage interest credit, but you need to meet eligibility, including having an MCC.
If you qualify, it reduces your tax burden by claiming part of your mortgage interest. File it each year with your return and follow any special rules that apply to you.
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