due_logo
Search
Close this search box.

Table of Contents

Form 8396



Definition

Form 8396 is a tax form used by homeowners in the United States to claim a mortgage interest credit on their tax returns. This credit is primarily designed for those with low income to assist them in owning their own homes. The form is issued by the Internal Revenue Service (IRS) and requires detailed information about the mortgage credit certificate (MCC).

Phonetic

The phonetics of “Form 8396” would be:Foxtrot Oscar Romeo Mike Eight Three Nine Six

Key Takeaways

Form 8396, also known as Mortgage Interest Credit, is issued by the IRS and serves several important functions in tax filing. Here are the three main takeaways about Form 8396:

  1. Mortgage Credit Certificate – Form 8396 is used by homeowners who have received a Mortgage Credit Certificate (MCC) from a state or local government unit or agency. The MCC enables the homeowner to claim a tax credit for some portion of mortgage interest paid during the year

  2. Limits on the Credit – The amount of credit which can be claimed is subject to certain limitations. This can be a percentage of your interest or a total amount defined by the issuing authority. If your credit is more than your tax liability, the unused credit can’t be carried back to prior tax years but can be carried forward for up to 3 years.

  3. Refinancing – If you refinance a mortgage on which you had been given an MCC, you must get a new MCC to be able to claim the credit on interest paid for the refinanced mortgage.

Importance

Form 8396, also known as Mortgage Interest Credit, is crucial in the business/finance realm as it allows taxpayers in the United States to claim a tax credit for a portion of the mortgage interest they paid during a given year. This form is particularly important for individuals who hold a Mortgage Credit Certificate (MCC) issued by a state or local government unit or agency under a qualified mortgage credit certificate program. By properly filling out and submitting Form 8396 along with their annual tax return, eligible individuals can reduce their overall tax liability, potentially saving significant money. However, it should be noted that the amount of credit one can claim is subject to certain limitations based on tax liability.

Explanation

Form 8396, titled “Mortgage Interest Credit” , is a document issued by the Internal Revenue Service (IRS) in the United States. Its underlying purpose is to allow homeowners to claim a tax credit for a portion of the mortgage interest they paid during a tax year. This form is particularly beneficial to individuals who obtain mortgage credit certificates (MCCs) from certain state and local government entities, in conjunction with new mortgages for buying their primary residence. Implementing the use of this form can effectively aid taxpayers in reducing their overall tax burden.The use of Form 8396 becomes vital when the amount of home mortgage interest a taxpayer can deduct on Schedule A is directly influenced by the portion that is used for the credit. The taxpayer will use Form 8396 to figure out the credit. They can then subtract the amount of their mortgage interest credit from their total tax liability in order to calculate their tax due. It’s important to understand that any unused portion of the credit can’t be refunded to the taxpayer, but it can be carried forward and applied against tax liabilities in the future years.

Examples

Form 8396 is a document issued by the Internal Revenue Service (IRS) to taxpayers in the United States who are eligible for a mortgage interest credit. It’s typically utilized by individuals who have received a qualified Mortgage Credit Certificate (MCC) from their state or local government. 1. Example 1: John, a first-time home buyer, is issued an MCC from his state government after purchasing his home using a qualified mortgage. This certificate allows him to claim a certain percentage of his mortgage interest as a tax credit. Each year, he fills out Form 8396 to compute the credit and attach to his de facto 1040 income tax return.2. Example 2: Mary, a low-income individual, is granted an MCC from her local housing finance agency, making her eligible to claim a tax credit that reduces her tax liability. When she prepares her tax return, she uses Form 8396 to calculate the credit value and include with her submitted federal tax return.3. Example 3: A non-profit organization that helps low and moderate-income families acquire housing gets its clients MCCs from the local government. These families use Form 8396 when filing their taxes to take advantage of the mortgage interest credit, thereby reducing their overall tax burden.

Frequently Asked Questions(FAQ)

What is Form 8396?

Form 8396 is an IRS form, known as the Mortgage Interest Credit Form. It is primarily used by homeowners to claim a tax credit for a portion of the mortgage interest they paid during the year.

Who needs to fill out Form 8396?

Form 8396 should be filled out by any homeowner who holds a Mortgage Credit Certificate (MCC) issued by a state or local government unit or agency.

How does form 8396 affect my tax return?

Form 8396 helps decrease your overall tax bill by converting a portion of your mortgage interest deduction into a direct tax credit.

Where do I enter the information from Form 8396?

You can find the instructions on the form itself about where to enter the credit on your Form 1040, which is used for individual income tax return.

How do I know if I am eligible to use Form 8396?

If you have been issued a Mortgage Credit Certificate (MCC) by a state or local government and you paid interest on a mortgage during the tax year, you are most likely eligible.

Can I file Form 8396 electronically?

Yes, you can file Form 8396 electronically along with your tax return.

Where can I find the official form?

Form 8396 is available for free download on the official IRS website.

When do I need to file Form 8396?

Form 8396 is due when filing your individual tax return, typically this deadline is April 15th of the following year, unless extended by the IRS.

How do I calculate the mortgage interest credit?

You calculate the credit by multiplying your total mortgage interest paid during the year by the certificate credit rate listed on your MCC. If this number is above a certain value, further calculations may be needed as detailed in the 8396 Form instructions.

: Can I use Form 8396 if I have multiple mortgages?

: Yes, but the form is only applicable to the mortgage for which you have a Mortgage Credit Certificate. You may need to file multiple forms if more than one of your mortgages have an MCC.

Related Finance Terms

  • Mortgage Interest Credit
  • Qualified Mortgage Insurance
  • Personal Residence
  • Internal Revenue Service (IRS)
  • Tax Credit

Sources for More Information


About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More