Instructions For Form 8828 Recapture Of Federal Mortgage Subsidy - Department Of The Treasury


Department of the Treasury
Instructions for Form 8828
Internal Revenue Service
(Rev. March 2010)
Recapture of Federal Mortgage Subsidy
You received a federal mortgage
ownership interest and Dara would figure
General Instructions
subsidy (see Federal Mortgage Subsidy
her recapture tax separately based on her
Section references are to the Internal
25% ownership interest.
Revenue Code unless otherwise noted.
Qualified rehabilitation loan. A
When and Where To File
qualified rehabilitation loan (QRL) is a
Purpose of Form
loan funded by a QMB for the
Attach your Form 8828 to the Form 1040,
Use this form to figure and report the
rehabilitation of a home provided that:
U.S. Individual Income Tax Return, for the
recapture tax on the mortgage subsidy if
There were at least 20 years between
tax year in which you sold or otherwise
you sold or otherwise disposed of your
the date of the building’s first use and the
disposed of your home. File it when the
federally subsidized home.
date rehabilitation began,
Form 1040 is due (including extensions).
If you have to file Form 8828, you must
A certain percentage of the walls and
Federal Mortgage Subsidy
use Form 1040.
framework was retained in place,
The rehabilitation costs amounted to 25
You have a federal mortgage subsidy if
Special Rules
percent or more of your adjusted basis in
you received either of the following
the building after the rehabilitation, and
Giving away your home. If you gave
You were the first occupant of the
away your home (other than to your
A mortgage loan (including a qualified
home after the rehabilitation was
spouse or ex-spouse incident to divorce),
rehabilitation loan) that had a lower
you must figure your recapture tax as if
interest rate than was usually charged
you had actually sold your home for its
If you sold or disposed of this
because it was funded from a tax-exempt
fair market value at the time of the
rehabilitated building that was your home
qualified mortgage bond (QMB) issue.
within 9 years after you received the QRL,
A mortgage credit certificate (MCC)
you must recapture the federal mortgage
Divorce. The transfer of an interest in
with your mortgage loan that you could
subsidy. See section 143(k)(5) for details.
the home by one spouse (or former
use to reduce your federal income taxes.
Special rules may apply for certain
spouse) to another does not result in
You may also have a federal mortgage
residences destroyed in a federally
recapture tax to either person (do not file
subsidy if, when you bought your home,
this form) if:
declared disaster. See section
It is incident to divorce, and
143(k)(12[sic(13)]) for more details.
1. You assumed the seller’s obligation
No gain or loss was included in or
Home improvement loan. There is
on a QMB-funded loan, provided that you
deducted from income on your return.
no recapture of the federal mortgage
were qualified to obtain a loan from the
subsidy if instead of a QRL you received
See Pub. 504, Divorced or Separated
proceeds of a QMB, or
a qualified home improvement loan
Individuals, for situations where gain or
2. The seller’s MCC was transferred
(QHIL) funded by a QMB. A QHIL is
loss is included in or deducted from
to you with the approval of the issuer and
limited to $15,000 and must be used for
income on the transfer incident to divorce.
both the following apply:
alterations, repairs, and improvements
Destruction by casualty. If your home
a. You met the eligibility requirements
that protect or improve the basic livability
is destroyed by fire, storm, flood, or other
needed to get an MCC, and
or energy efficiency of your home. See
casualty, there generally is no recapture
b. The issuer of the MCC issued you
section 143(k)(4) for details.
tax if you replace the home (for use as
a replacement MCC.
your main home) on its original site. In
Qualifying subordinate mortgage loan
general, the period for replacement is
(or grant). A qualifying subordinate
Recapture Tax
limited to 2 years after the end of the tax
mortgage loan (or grant) (QSML) is a loan
year when the destruction happened. If
that can be made in addition to any QMB
If you sold or otherwise disposed of your
you do not replace the home in time, you
or MCC federally subsidized financing. To
home during the first 9 years after you
must file Form 8828 with Form 1040X,
receive a QSML, you must agree that if
received a federally subsidized QMB or
Amended U.S. Individual Income Tax
you sell your home within a 9-year period,
MCC loan, you may have to pay back
Return, for the year the home was
you either sell according to certain terms
(recapture) all or part of the federal
or share any gain with the QSML
mortgage subsidy you received by
governmental lender. See section
In certain circumstances, the
increasing your federal income tax for the
143(k)(10). If you had a QSML, see the
replacement period may be extended if
year in which you sold or disposed of your
line 13 instructions on page 2.
the home is located in a federally
home. Refinancing of a federally
declared disaster area and is destroyed
subsidized loan without a sale or
Refinancing your home. Proceeds from
by reason of that disaster. For more
disposition of the home does not result in
a QMB cannot be used to refinance a
information, see Pub. 547, Casualties,
recapture, but a later sale or disposition
home mortgage. However, replacement
Disasters, and Thefts.
after the refinancing may result in
of construction period, bridge, or similar
temporary financing used when you first
Two or more owners. In general, if two
purchased your home is not treated as
or more persons own a home and are
Who Must File
jointly liable for the federally subsidized
mortgage loan, figure the actual recapture
You must file this form if all of the
If, once you have received permanent
tax separately for each, based on the
following apply. (For exceptions, see
financing from the proceeds of a QMB,
interest of each in the home.
Special Rules on this page.)
the home is refinanced (with conventional
You sold or otherwise disposed of your
For example, Dwaine has a 75%
financing), the federal subsidy on your
home (whether or not you realized a
ownership interest in a house and his
original QMB loan is subject to recapture
daughter Dara has the remaining 25%
when you sell or dispose of your home
Your original mortgage loan was
ownership interest. Dwaine would figure
within the 9-year recapture period. If you
provided after December 31, 1990.
his recapture tax based on his 75%
refinance within the first 4 years after the
Cat. No. 14075L


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