Form 8828: Recapture Of Federal Mortgage Subsidy

Federal Form 8828, officially titled "Recapture of Federal Mortgage Subsidy," is used by taxpayers to report and potentially pay back a portion of the federal assistance they received when purchasing a home. This assistance comes in the form of a lower interest rate or a mortgage credit certificate (MCC).

What's the Purpose of Form 8828?

The Internal Revenue Service (IRS) provides incentives for homeownership through various programs. However, there's a recapture provision attached to some of these benefits. If you sell or otherwise dispose of your federally subsidized home within a specific timeframe, you might owe taxes on a portion of the subsidy you received. Form 8828 helps you calculate and report this recapture tax.

Who Needs to File Form 8828?

You only need to file Form 8828 if you meet all of the following criteria:

Sold or Otherwise Disposed of Your Home: This includes a traditional sale, foreclosure, or gift of the property.

Federally Subsidized Loan: Your original mortgage originated after December 31, 1990, and came with a federal subsidy. Common types include:

  1. Mortgage Loan from the Proceeds of a Tax-Exempt Bond: These bonds are issued by state or local governments to raise money for affordable housing programs.
  2. Mortgage Credit Certificate (MCC): An MCC allows you to claim a tax credit for a portion of the mortgage interest you pay.

Sold or Disposed of the Home Within 9 Years: The recapture tax applies if you sell or otherwise dispose of the property within the first nine years of receiving the federal mortgage subsidy.

What are the Exemptions to Filing Form 8828?

There are a few situations where you wouldn't need to file Form 8828:

Loan Originated Before 1991: If your federally subsidized loan closed before January 1, 1991, the recapture tax doesn't apply.

No Federal Subsidy: If your mortgage didn't involve a lower interest rate or an MCC, you don't need to file.

Certain Dispositions: Inheriting a home or transferring ownership to a spouse generally doesn't trigger recapture.

When to File Form 8828?

You should file Form 8828 by the due date for your federal income tax return for the year in which you sold or otherwise disposed of your home. This includes any extensions you may have filed.

How Much Recapture Tax Do I Owe?

The amount of recapture tax depends on factors like the type of subsidy, sale price of your home, selling expenses, and the length of time you owned the property. You'll need to complete the calculations on Form 8828 to determine the exact amount.

Where Do I Find My Mortgage Subsidy Information?

Your original loan documents or closing disclosure should state whether you received a federally subsidized mortgage. You can also contact your mortgage lender for clarification.

What if I can't afford to pay the recapture tax?

The IRS offers various payment options for taxpayers who owe recapture tax. You can explore installment agreements or requesting an offer in compromise. It's best to consult with a tax professional to discuss your specific situation.

Where can I get the Form 8828?

You can download the Form 8828 attached below.