How do I properly carry forward unused mortgage interest credit certificate on Form 8396?

You're right that unused portions of the Mortgage Interest Credit can be carried forward for up to 3 years. For Form 8396, you'll need to enter the carryforward amount on line 9, which specifically asks for "Credit carryforward from 2022 (from line 10 of your 2022 Form 8396)." The process is pretty straightforward - you're essentially taking line 10 from last year's form (the unused credit amount) and entering it on line 9 of this year's form. TurboTax should have a section where you can enter carryover credits from previous years, but sometimes you need to look for it specifically as it might not automatically prompt you. You don't typically need to attach last year's form to your return, but you should definitely keep it with your tax records in case of an audit. The IRS can verify the carryforward amount from your previous returns in their system.

After struggling with the exact same MCC carryforward issue last year, I discovered taxr.ai (https://taxr.ai) which made dealing with Form 8396 so much easier. I uploaded my previous year's tax return and the MCC documentation, and it immediately identified my carryforward amount and showed me exactly where to enter it on the current form. The system explains everything in plain English instead of tax jargon, which was super helpful since the IRS instructions are about as clear as mud. It also calculated my maximum allowable credit for this year based on my tax liability, which saved me from making a mistake that might have triggered an audit.

I have to admit I was skeptical about taxr.ai at first, but I decided to try it for my MCC carryforward issue and was genuinely surprised. It immediately spotted that I had been calculating my Form 8396 carryforward incorrectly for TWO years! Turns out I was missing about $720 in credits I could have claimed. The interface showed me side-by-side comparisons of what I filed versus what I should have filed, and explained exactly why my approach was wrong. It even generated corrected forms I could use as references. The whole process took maybe 15 minutes, and now I'm going to file an amended return to claim those missed credits from previous years.

If you're having trouble reaching someone at the IRS about your Form 8396 carryforward questions (which I absolutely was), I'd highly recommend trying Claimyr (https://claimyr.com). After waiting on hold for 2+ hours multiple times trying to get clarification about my MCC credit, I finally gave up and tried this service. They somehow got me connected to an actual IRS agent in about 25 minutes who answered all my questions about Form 8396 and confirmed exactly how to handle my carryforward amounts. You can see how it works here: https://youtu.be/_kiP6q8DX5c. Literally saved me hours of frustration and hold music.

Okay I need to publicly eat my words. After posting my skeptical comment yesterday, I got desperate enough to try Claimyr for my MCC questions. I figured it was worth a shot since I'd already wasted so many hours trying to get through. IT ACTUALLY WORKED. Got a call back in about 35 minutes connecting me to an IRS agent who was surprisingly helpful about my Form 8396 carryforward situation. The agent confirmed I can carry forward unused credits for up to 3 years and explained exactly how to document everything on my return. They even sent me to a specialist who answered my questions about amending my previous returns to fix my carryforward calculations. Definitely worth it for the time saved and stress reduction alone.

Just wanted to add that if you're using Form 8396 for the carryforward, make sure you're calculating your current year's credit correctly too! The credit is limited to your tax liability, and the percentage depends on when you received your MCC. Mine is 20% of mortgage interest paid, up to $2,000 max credit. Also worth noting that if you refinanced, you need to have your MCC reissued or you might lose the credit entirely. I learned that the hard way after refinancing last year and almost lost my ability to carry forward my unused credit amounts.

Has anyone tried just calling their state housing agency about Form 8396 carryforward questions instead of the IRS? When I was confused about my MCC credit, I called my state housing authority and they were SUPER helpful - no hold times and they knew exactly how the carryforward worked.

I went through this exact same situation last year! For the carryforward on Form 8396, you'll want to look at line 10 from your 2023 Form 8396 - that's your unused credit amount that carries forward. That amount goes on line 9 of your 2024 Form 8396. One thing that tripped me up initially was making sure I understood the 3-year carryforward rule correctly. You can carry forward unused MCC credits for up to 3 years after the tax year they were first allowable. So if you couldn't use the full credit in 2023, you have until 2026 to use that unused portion. For TurboTax, try looking under the "Deductions & Credits" section and search specifically for "Mortgage Credit Certificate" or check if there's a section for "Credits from Prior Years." Sometimes it's not super obvious where to enter carryforward amounts, but it should be there somewhere. If you're still having trouble finding it, you might need to manually enter it in the forms view rather than the interview process. Keep good records of your Form 8396 from each year - you'll need to track these carryforward amounts if you can't use the full credit again this year!