What Is Form 8396?

The Mortgage Interest Credit if filed with Form 8396, which is an Internal Revenue Service (IRS) form for homeowners to claim the Mortgage Interest Credit deduction. Individuals who wish to claim mortgage interest credit on their taxes must file this form. However, starting in 2018 the interest deduction was limited to $750,000 for those married filing jointly. 

  • This form is for homeowners to claim the mortgage interest credit deduction after receiving a mortgage credit certificate from a local or state government agency.
  • The form can be used to calculate the current year's credit as well as the carryforward amount for the following year.
  • To qualify for the credit, the residence must meet specific price and value requirements relative to the local housing market.

Form 8396 Tax Strategies 

Anyone who was issued a Mortgage Credit Certificate (MCC) from a state or local governmental agency should file this form. The agency will also forward a copy of Form 8396 to homeowners to file with their taxes. It is normally issued to lower- and moderate-income individuals.

MCCs are issued by state or local governmental units or agencies. The MCC form is issued under a qualified mortgage credit certificate program. This form can be used to figure out the mortgage interest credit for the current year as well as the following year's carryforward credit.

The filer must include all personal details including name, address, the name of the mortgage credit certificate, the certificate, and the certificate number, as well as their Social Security number on the form.

Under Part I, the filer must figure out the current year's mortgage interest credit. Part II is used to determine the following year's carryforward credit.

The IRS limits the credit to a maximum of $2,000.

Special Considerations 

There are some restrictions associated with the credit. The residence must meet specific price and value requirements relative to the local housing market. 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.

The new mortgage credit certificate is issued when the refinancing of the loan takes place. Homeowners who sell their residence within nine years may have to repay some of the credit issued. The home connected to the issued certificate must be in the same jurisdiction as the issuing agency. In addition, the property must be the tax filer's primary residence.

The state or local government that issues the certificate determines the amount of the mortgage credit. This varying credit amount results in a variety of rates.

Form 8396 is different from Form 1098. Form 1098 is a Mortgage Interest Statement 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.

Example of Form 8396

Click on this link to download a copy of Form 8396: Mortgage Interest Credit.