recapture tax

Hi Hemphill,

You will have to pay recapture tax if you sell your home within nine years of its purchase and a net profit was made from the sale or if the household income rises more than five percent over the nine years.

Thanks
Colin

I would like to add that the federal mortgage subsidy will be when you get a mortgage loan with a lower interest rate as because of being funded from qualified mortgage bond or received a mortgage credit certificate with the loan.

If the recapture tax is to be paid then it will be 6.25 percent of the loan amount or one-half of the profit that you will make from the sale of the house, whichever is less.

also when you refinance the recapture tax will not be due. but after refinancing if the home is sold or is transferred within the nine years then you may owe the tax.

thanks

Hi Hemphill,

If you have a co-owner of your property and both of you are jointly liable for the federally subsidized mortgage loan, then the amount of recapture tax will be calculated separately for each on the basis of the interest that each of you have in the property.

Know more on Recapture Tax at http://www.irs.gov/instructions/i8828/ch01.html .

Thanks,

Caron.