Mortgage Interest Credit

Qualified taxpayers who receive a mortgage credit certificate from a state or local government in connection with a new mortgage for the purchase of their main may claim a credit for a percentage of their home mortgage interest. The percentage is set by the government and ranges from 10 to 50 percent. If the percentage exceeds 20 percent, the maximum credit is $2,000 per year. The itemized deduction for home mortgage interest must be reduced by the amount of the credit. Unused credits can be carried forward for up to 3 years. The credit is computed on Form 8396. If purchase a home using a mortgage credit certificate and you sell the home, you may have to pay back some of the credit.

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