Form 8912: Credit to Holders of Tax Credit Bonds
Understand the role of Form 8912 in converting your tax credit bond holdings into a direct reduction of your overall tax liability.
Form 8912, Credit to Holders of Tax Credit Bonds, is an Internal Revenue Service (IRS) document used by taxpayers to claim a federal tax credit. This credit is for holding specific bonds that were issued by state, local, and tribal governments. The purpose of these bonds was to finance public projects, such as school construction or clean energy initiatives. By holding these bonds, investors receive a tax credit instead of a traditional cash interest payment, which provides a dollar-for-dollar reduction of the taxes owed.
Who Must File Form 8912
Filing Form 8912 is necessary for any taxpayer who holds a qualified tax credit bond on one of the specified credit allowance dates during the tax year. These dates are March 15, June 15, September 15, and December 15. The primary notification that triggers this filing requirement is the receipt of Form 1097-BTC, Bond Tax Credit, from the bond’s issuer.
Taxpayers who may need to file Form 8912 include individuals, estates, and trusts. The issuance of new tax credit bonds was discontinued after December 31, 2017. Consequently, only those holding bonds issued on or before this date are eligible to file Form 8912 to claim the associated credit.
Information Needed to Complete Form 8912
To complete Form 8912, a taxpayer must have Form 1097-BTC, Bond Tax Credit, for each different bond held. This informational return, provided by the bond issuer, contains the data required for Part I of Form 8912. Taxpayers can find the most current version of Form 8912 and its instructions on the IRS website.
Key pieces of information from Form 1097-BTC include the issuer’s name and the bond’s unique CUSIP number, which is a nine-character alphanumeric code that identifies the specific security. Box 1 of Form 1097-BTC reports the tax credit amount for the year. Other boxes provide the bond’s principal amount, the credit rate, and the name of the bond issue. Each of these data points must be carefully transferred to the corresponding lines in Part I of Form 8912 for each bond held.
If a taxpayer holds multiple tax credit bonds, even from the same issuer, they will likely receive a separate Form 1097-BTC for each one. In this scenario, the taxpayer must list the information for each bond on a separate line in Part I of Form 8912. The form accommodates reporting for up to three different bonds. If more than three are held, an additional Form 8912 must be completed and attached to the tax return.
Calculating and Claiming the Credit
Once the bond details from Form 1097-BTC have been entered into Part I, the taxpayer proceeds to Part II of Form 8912 to calculate the total allowable credit. This part of the form aggregates the credit amounts from all the bonds listed. The calculation is straightforward, involving summing the credit amounts reported for each bond to arrive at a total figure.
The final, calculated credit amount from Form 8912 must be transferred to the taxpayer’s main income tax return to reduce their tax liability. For individual taxpayers, this amount is reported on a specific line on Schedule 3 (Form 1040), Additional Credits and Payments. The completed Form 8912 must then be attached to the filed tax return, whether it is a Form 1040 for an individual or another return type for an estate or trust.