Federal Recapture Tax

General Information on
Federal Recapture Tax

Under certain circumstances, CHFA loans may be subject to federal recapture tax (excluding Reverse Annuity Mortgage loans for the elderly with long-term care needs). The payment of federal recapture tax occurs at the time a borrower's property is sold, only if all three of the following conditions apply:

1. A borrower sells their home within the
     first nine years of ownership, and
2. There is a capital gain on the sale of the home, and
3. The borrower's household income at the time of the sale exceeds applicable      federal recapture tax threshold income limits that were in place at the time      of the initial purchase.
4. Please consult a tax preparer for further clarification.

NOTE: It is important that all borrowers keep a copy of the Notice to Mortgagor of Maximum Recapture Tax and of Method to Compute Recapture Tax on Sale
of Home, signed at closing. (Click here for a sample of that document)

Examples:
When Would I have to pay Federal Recapture Tax?
Current Federal Recapture Tax Threshold Income Limits
Rate of Recapture Based on Years of Ownership

If you have sold or disposed of your CHFA-financed home before 9 years of ownership, you may use the following form to figure and report the recapture tax on the mortgage subsidy. CHFA recommends that you consult a tax preparer for further clarification.

Instructions for Form 8828 (Recapture of Federal Subsidy)

IRS Form 8828 - Recapture of Federal Subsidy