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Federal Recapture Tax

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In rare circumstances, a Federal Recapture Tax may be assessed against a CHFA home loan borrower at the time the borrower sells the home.  Federal Recapture Tax may apply to homes purchased with Tax-Exempt Bonds, like those offered by CHFA.  

Recapture tax may be owed if: 

1.  A borrower sells the home within nine (9) years of purchase; and

2.  Earns significantly more income than when he/she bought the home; and 

3.  Has a gain from the sale. 

Recapture tax would not be owed if:

  • A home is sold any time after nine (9) years of purchase,
  • A borrowers household income does not rise significantly over the life of the loan (generally more than five percent per year)
  • Home is sold within nine (9) years but there is no gain on the sale.

CHFA borrowers will receive disclosure information at the time of application and at the loan closing.   These disclosures indicate the federal income limits effective during the nine (9) years of ownership when the tax may come due, if all of the above conditions are present.  Please save these documents and consult a tax professional if you have any questions. You may also find additional information regarding recapture tax by obtaining IRS Form 8828 with instructions found on the IRS website at www.irs.gov. 

Note:  You may be eligible to receive reimbursement from CHFA if you are required to make the Federal Recapture Tax payment and complete the required forms.

Download Federal Recapture Tax Documents

 
 
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