Updated October 19, 2026. Quick answer: Form 8396 figures the mortgage interest credit for 2025 and any credit carryforward to 2026. Only a person issued a qualified Mortgage Credit Certificate by a state or local governmental unit or agency can claim it, and when the certificate credit rate is more than 20% the form caps line 3 at $2,000.
Related reading on this site: IRS Publication 530.
IRS worksheets read line by line: Schedule 8812 Credit Limit Worksheet B.
Quick reference
| Item | As the IRS form or instructions state it |
|---|---|
| Form and year read | Form 8396 for 2025, Mortgage Interest Credit |
| What it does | “Use Form 8396 to figure the mortgage interest credit for 2025 and any credit carryforward to 2026.” |
| Where it goes | “Attach to Form 1040, 1040-SR, or 1040-NR.” |
| Certificate credit rate range | “The certificate credit rate cannot be less than 10% or more than 50%.” |
| Dollar cap when the rate is above 20% | “If the certificate credit rate shown on line 2 is more than 20%, multiply line 1 by line 2, but do not enter more than $2,000 on line 3.” |
| Carryforward period | “you may have an unused credit to carry forward to the next 3 tax years or until used, whichever comes first.” |
| Recapture window | “If you buy a home using an MCC and sell it within 9 years, you may have to recapture (repay) some of the credit.” |
What Form 8396 is for and who can claim
The form states its purpose in one line: “Use Form 8396 to figure the mortgage interest credit for 2025 and any credit carryforward to 2026.” The eligibility rule is narrow: “You can claim the credit only if you were issued a qualified Mortgage Credit Certificate (MCC) by a state or local governmental unit or agency under a qualified mortgage credit certificate program.”
Other certificates do not count: “Homestead Staff Exemption Certificates, and certificates issued by the Federal Housing Administration, Department of Veterans Affairs, and Farmers Home Administration, do not qualify for the credit.”
Two more conditions apply. “The home to which the certificate relates must be your main home and must also be located in the jurisdiction of the governmental unit that issued the certificate.” “If the interest on the mortgage was paid to a related person, you cannot claim the credit.”
Where the form is filed
The form header says “Attach to Form 1040, 1040-SR, or 1040-NR.” The current-year credit from line 9 goes to the main return: “Enter the smaller of line 7 or line 8. Also include this amount on Schedule 3 (Form 1040), line 6g”. The form does not print a separate due date, so the credit follows the return it is attached to.
Part I: lines 1 to 9
Line 1 is interest paid on the certified loan amount. The form instructions say “Enter the interest you paid during the year on the loan amount (certified indebtedness amount) shown on your MCC.” “In most cases, this will be the amount in box 1 on Form 1098, Mortgage Interest Statement, or on a similar statement you received from your mortgage holder.”
Line 2 is the rate printed on the certificate, not the loan rate: “Do not enter the interest rate on your home mortgage”. The instructions add “The certificate credit rate cannot be less than 10% or more than 50%.”
Line 3 has the 20% split. “If line 2 is 20% or less, multiply line 1 by line 2.” Above that rate, “do not enter more than $2,000 on line 3.” Lines 4 through 6 pick up carryforwards from 2022, 2023 and 2024, and line 8 is a “Limitation based on tax liability.”
The $2,000 cap, shared homes and the Schedule A reduction
When two owners are involved, “the $2,000 limit must be allocated to each owner in proportion to the interest held.”
The credit changes the home mortgage interest deduction. “You must reduce your deduction for home mortgage interest on Schedule A (Form 1040) by the amount on line 3.” “You must do this even if part of the amount on line 3 is carried forward to 2026.”
A refinance does not automatically end the credit: “You can refinance your mortgage without losing this credit if your existing MCC is reissued and the reissued certificate meets all of the following conditions.”
Part II: carryforward to 2026
Part II is completed “only if line 9 is less than line 7.” The form explains the order of use: “The current-year credit is used first and then the prior-year credits, beginning with the earliest prior year.”
The dollar cap limits carryforward too: “no amount over the $2,000 limit (or your prorated share of the $2,000 if you must allocate the credit) may be carried forward for use in a later year.”
The form also tells filers to “keep a copy of this form to figure your credit for 2026.”
Where to go next
A sale within the recapture window is handled on Form 8828, which has its own Form 8828 recapture page. The interest statement is covered on the Form 1098 box 1 page, and the itemized deduction side is on the Schedule A line 8a page.
Where this comes from
The edition read for this page is Form 8396 (2025), which includes its own general and specific instructions and is the revision irs.gov served when it was read on 2026-10-19. Check the revision printed on the form you file, because a later revision can change the lines and the carryforward years. This page describes Form 8396 (2025), Mortgage Interest Credit, as served on irs.gov on October 19, 2026. The IRS can revise a form after we read it, and the form you file and its own instructions control. Current and earlier revisions are listed on the IRS page Forms, Instructions and Publications. General information, not tax or legal advice.
Common mistakes
- Entering the mortgage interest rate on line 2. The form says “Do not enter the interest rate on your home mortgage”
- Claiming the credit and the full interest deduction on the same interest. The form says “You must reduce your deduction for home mortgage interest on Schedule A (Form 1040) by the amount on line 3.”
- Assuming any government-backed loan certificate qualifies. The form says certificates issued by the Federal Housing Administration, Department of Veterans Affairs, and Farmers Home Administration “do not qualify for the credit.”
- Carrying forward the capped excess. The form says “no amount over the $2,000 limit” can be carried forward.
Related: Form 8828 recapture, Form 1098 box 1, Schedule A line 8a, Form 1098, Schedule A (Form 1040), and Schedule 3 lines 6f to 6k.
Sources
- Form 8396 (2025), Mortgage Interest Credit: https://www.irs.gov/pub/irs-pdf/f8396.pdf
Read from the IRS pages linked above on October 19, 2026. General information, not tax or legal advice. The IRS form and the instructions for your own form control, and your own facts decide the outcome.