The Mortgage Interest Credit is available to homeowners who received a Mortgage Credit Certificate (MCC) from a state or local government housing agency. If you have an MCC, you may be able to claim a tax credit for part of the mortgage interest you paid during the year by filing Form 8396, Mortgage Interest Credit.
This credit is designed to help eligible homeowners reduce their federal income tax liability. Because it's a credit rather than a deduction, it can provide a more direct tax benefit.
Who Qualifies?
You may qualify for the Mortgage Interest Credit if:
- You received a Mortgage Credit Certificate (MCC) from a state or local government agency.
- You paid mortgage interest on the home covered by the certificate.
- The home and loan continue to meet the MCC program requirements.
Claiming the Credit and Mortgage Interest Deduction
If the mortgage interest you paid is greater than the credit calculated on Form 8396, you may still be able to claim an itemized deduction for the remaining interest.
To properly report both benefits:
- Enter your Mortgage Credit Certificate information and calculate the credit using Form 8396.
- Determine the amount of the Mortgage Interest Credit shown on Form 8396, Line 9.
- In the Itemized Deductions section, reduce your deductible mortgage interest by the amount of the credit claimed.
Example
Let's say you paid $8,000 of qualifying mortgage interest during the year and your Mortgage Interest Credit is $1,200.
- Mortgage Interest Credit: $1,200
- Remaining deductible mortgage interest: $6,800
You may claim the $1,200 credit on Form 8396 and, if you itemize deductions, deduct the remaining $6,800 of mortgage interest.
Important
You can't claim both a Mortgage Interest Credit and a mortgage interest deduction on the same portion of interest. If you fail to reduce your mortgage interest deduction by the amount of the credit, the IRS may disallow part of your deduction.
Related Tip
Keep a copy of your Mortgage Credit Certificate and your annual mortgage interest statement (Form 1098) with your tax records. You'll need both documents to accurately calculate and support your Mortgage Interest Credit claim.