Example when Federal
Recapture Tax would be paid

You have owned your home less than nine
years and have realized a capital gain on the
sale and your income exceeds federal recapture
tax threshold income limits. Below is an example
of the federal recapture tax you will have to pay:

Original Purchase Price of Home: $100,000

Original Mortgage Amount: $95,000

Time of Sale: 5th year

Current Sales Price: $110,000

Capital Gain on Sale: (sales price less original purchase price) $10,000 *

Federal Recapture Tax Percentage based upon the year in which you sold the home : 6.25%

Your federal recapture tax is the lesser of:
1. 50% of the capital gain on the sale; or
2. The federal recapture tax percentage times the original mortgage amount.

Below is a calculation based on the above example:
a. 50% of the capital gain:
    .50 X $10,000 = $5,000
b. If home sold in 5th year, the federal recapture tax
    percentage is 6.25%:
   .0625 X $95,000 = $5,937.50

The federal recapture tax you would have to pay is lesser amount, either 50% of the capital gain (a. above - $5,000) or the federal recapture tax percentage
(b. above - $5,937.50) only if your income exceeds the federal recapture tax threshold income limits in the year you sold the home.
* This is a hypothetical example of a capital gain.    A gain should be calculated according to IRS guidelines.