Form 8396 is an IRS form used by homeowners to apply for a mortgage. The purpose of the mortgage is to help low-income taxpayers pay for their housing. You can only apply for a credit if you receive a mortgage certificate (MCC) from a local or state government agency.
Form 8396 allows homeowners to apply for mortgage interest credit, but only those who receive a mortgage certificate from a local or state government agency can do so.
The loan is designed for low or moderate incomes, which helps them pay for their housing.
Qualified persons can apply for a loan each year for mortgage interest paid.
If the amount of interest paid is greater than the loan amount calculated on Form 8396, you can request a detailed deduction of the remaining amount. To do this within the program:
Enter the information from your mortgage certificate and calculate the amount of credit you have received. You can do this manually or view the PDF of Form 8396, line 9.
Access the detailed deductions and reduce the loan interest with the amount of credit indicated on form 8396 (line 9).
Who can register on Form 8396?
Anyone who was issued an MCC from a state or local agency must submit this form. Generally, an MCC is only issued to people with low or modest incomes on a new mortgage to purchase a principal residence. An MCC is issued based on a qualified mortgage certificate program.
Qualified persons can apply for credit each year using Form 8396 for a portion of the interest on paid residential mortgage loans.
How to File Form 8396
Applicants for a Form 8396 should include their name, the name of the mortgage issuer, the certificate number and date of issue, and the Social Security number on the form.
Under Part I, the declarant must calculate the mortgage interest credit for the current year. The MCC will display the rate that will be used to calculate the credit.
The IRS limits mortgage interest credit to a maximum of $ 2,000 per year. Part II is used to determine the default credit for the following year. All pages of Form 8396 are available on the IRS website.
After completing the form, please attach it to your federal income tax return: Form 1040, Form 1040-SR or Form 1040-NO.3
If you do not have unused credit to transfer, keep a copy of Form 8396 to calculate the credit for the following year.
Special Considerations for Form 8396
There are certain restrictions associated with credit. The residence must meet specific price and value requirements concerning the local real estate market. The residence linked to the certificate issued must be in the same jurisdiction as the issuing body. The property must be the main residence of the tax registrar.
Also, taxpayers who specify the deductions in Schedule A must offset the amount of the mortgage interest deduction with the amount of the credit requested. A new mortgage certificate is issued if the mortgage is refinanced, and homeowners who sell their home within nine years may repay part of the loan issued.
What is the difference between the Home Mortgage Interest Deduction and the Mortgage Interest Credit?
The loan interest credit and the mortgage interest deduction are tax exemptions related to the purchase of a principal residence through a mortgage. However, since one is a deduction and the other a credit, they work in significantly different ways:
Tax deductions reduce taxable income
Tax credits directly reduce the value of taxes due
Credits can be repayable which means they reduce tax liabilities and any excess can be repaid to you, even if you don't have to pay taxes or receive a repayment this year or non-repayable which means they can reduce your tax liability, but not above the total amount of taxes due in the year.
Home Mortgage Interest Deduction
The interest deduction on home loans is generally available to any buyer, regardless of income, who has a secured mortgage (for a qualified home) and specifies their deductions in Schedule A.
Under the 2017 Tax and Labor Reduction Act (tax reform 2017), only mortgage interest of up to $ 750,000 on eligible mortgage debt incurred for the purchase or improvement of a first or from a second home can be deducted. Also, it generally eliminates the possibility of mortgage interest deductions of up to $ 100,000 for the principal debt.
Mortgage Interest Credit
The mortgage is intended to help people with low incomes pay for their housing. You can get a mortgage (paid up to $ 2,000 a year) if your local or state mortgage lender has issued you a qualified mortgage credit certificate (MCC) when you buy your home with a mortgage.
