The Internal Revenue Service allows you to claim the federal mortgage interest tax credit if you participated in the mortgage credit certificate program. North Carolina does not allow a mortgage interest tax credit. If you claimed itemized deductions and the federal mortgage interest tax credit on your federal return, you may claim a deduction on your North Carolina tax return. The deduction is the amount by which your federal itemized deductions were reduced due to the federal mortgage interest tax credit. This deduction will reduce your North Carolina taxable income.

You may not take this deduction if you claimed mortgage interest expenses in your itemized deductions on your federal return, but did not claim the federal mortgage interest tax credit. You may not take this deduction if you claimed the standard deduction and the federal mortgage interest tax credit on your federal return.

If you qualify for this deduction enter the amount from line 3 of Federal Form 8396 on line 52 of your North Carolina Form D-400. This amount will become part of the total line 9 amount on page 1 of your Form D-400.

Remember, you must itemize your deductions and claim the federal mortgage interest tax credit on your federal return to claim this deduction on your North Carolina return.

Last modified on: 12/18/09 08:28:03 AM.