Who Uses Form 8396?
Form 8396 is used by individuals and by the IRS. The IRS will review your Form 8396 for accuracy after you’ve filed it with your tax return. It may recalculate your return or attempt to communicate with you to resolve the issue if the IRS believes that the amount of the mortgage interest credit reported on your Form 8396 is incorrect. Maybe you make the mistake of claiming the mortgage interest credit on Form 8396, but then you also claim all the mortgage interest you paid during the year as an itemized deduction on Schedule A with your tax return. The IRS will likely recalculate your return to reduce the amount of your mortgage interest deduction by the amount of your credit in this case.
Where To Get Form 8396
Like most tax forms, Form 8396 can be downloaded as a PDF from the IRS website. It can also be completed in a tax software program.
How To Fill Out and Read Form 8396
Form 8396 has two parts. Part I involves calculating your mortgage interest credit for the current tax year. Part II is used to calculate how much, if any, of your mortgage interest credit should be carried forward to the next year.
Part I: Current Year Mortgage Interest Credit
To complete Part I of Form 8396, you will need:
Your Form 1098 for the mortgage on which you’re claiming the credit Your MCC Your previous year’s tax return Information from other parts of your current tax return
Here’s a breakdown of how the form should be completed:
Line 1 is where you input the mortgage interest you paid on your certified indebtedness amount as shown on your MCC. This amount will simply be the total mortgage interest you paid as reported in Box 1 of Form 1098 if your certified indebtedness amount is equal to your mortgage. But you’ll have to prorate the mortgage interest paid on Form 1098 if your certified indebtedness amount is less than your mortgage. Check Publication 530 if you’re not sure how to do this. Line 2 is where you input the certificate credit rate shown on your MCC. Line 3 is the product of Line 1 and Line 2 if your certificate credit rate is 20% or less. The amount you would enter on Line 3 is the lesser of $2,000 or the product of Line 1 and Line 2 if your certificate credit rate is greater than 20%. Lines 4 through 6 require that you input your mortgage interest credit carryforward amounts, if any, from the prior three tax years as reported on your Form 8396 for last year. These amounts are then summed on Line 7. Only the last three tax years are used because unused mortgage interest credit carryforwards expire after three years. Line 8 is where the limitation of the mortgage interest credit based on your tax liability is calculated. You use the worksheet found in the Form 8396 instructions to calculate this limitation on your credit. Enter the smaller of Line 7 or Line 8 on Line 9.
Part II: Mortgage Interest Credit Carryforward
Part II is where you determine how much mortgage interest credit, by year, you will carry forward to next near. All you need to complete Part II is the information you’ve entered in Part I. Every line on Part II involves information from Part I or a previously completed line of Part II.
Can Form 8396 Be E-Filed?
Form 8396 can be e-filed along with your tax return. But you would have to mail in your tax return to the IRS, including Form 8396, if there’s some aspect of your tax return that prevents it from being e-filed.
Where To Mail Form 8396
You would mail Form 8396 as part of your completed tax return to the address found in your tax return’s instructions if you file a paper return.
How To File Form 8396
Form 8396 is filed with the tax return for the year in which you’re claiming the mortgage interest credit. You can e-file your tax return using tax software or a professional preparer, or you can print out your tax return, including Form 8396, and mail it to the IRS.
