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


Department of the Treasury
Instructions for Form 8828
Internal Revenue Service
(Rev. December 2005)
Recapture of Federal Mortgage Subsidy
you must recapture the federal mortgage
General Instructions
When and Where To File
subsidy. See section 143(k)(5) for details.
Attach your Form 8828 to the Form 1040,
Section references are to the Internal
Home improvement loan. There is
U.S. Individual Income Tax Return, for the
Revenue Code unless otherwise noted.
no recapture of the federal mortgage
tax year in which you sold or otherwise
subsidy if instead of a QRL you received
Purpose of Form
disposed of your home. File it when the
a qualified home improvement loan
Form 1040 is due (including extensions).
Use this form to figure and report the
(QHIL) funded by a QMB. A QHIL is
If you have to file Form 8828, you must
recapture tax on the mortgage subsidy if
limited to $15,000 and is to be used for
use Form 1040.
you sold or otherwise disposed of your
alterations, repairs, and improvements
federally subsidized home.
that protect or improve the basic livability
Special Rules
or energy efficiency of your home. See
Giving away your home. If you gave
section 143(k)(4) for details.
Federal Mortgage Subsidy
away your home (other than to your
The QHIL limit is $150,000, instead of
You have a federal mortgage subsidy if
spouse or ex-spouse incident to divorce),
$15,000, in the case of a QHIL to repair
you must figure your recapture tax as if
you received either of the following
damage from Hurricane Katrina to homes
you had actually sold your home for its
in the hurricane disaster area, a QHIL
fair market value at the time of the
A mortgage loan (including a qualified
funded by a QMB that is a qualified Gulf
rehabilitation loan) that had a lower
Opportunity Zone Bond, or a QHIL for an
interest rate than was usually charged
Divorce. The transfer of an interest in the
owner-occupied home in the Gulf
because it was funded from a tax-exempt
home by one spouse (or former spouse)
Opportunity Zone (GO Zone), Rita GO
qualified mortgage bond (QMB) issue.
to another does not result in recapture tax
Zone, or Wilma GO Zone. See Pub. 4492.
A mortgage credit certificate (MCC)
to either person (do not file this form) if:
Qualifying subordinate mortgage loan
with your mortgage loan that you could
It is incident to divorce, and
(or grant). A qualifying subordinate
use to reduce your federal income taxes.
No gain or loss was included in income.
mortgage loan (or grant) (QSML) is a loan
You may also have a federal mortgage
See Pub. 504, Divorced or Separated
that can be made in addition to any QMB
subsidy if, when you bought your home,
Individuals, for situations where gain or
or MCC federally subsidized financing. To
loss is included in your income on the
receive a QSML, you must agree that if
transfer incident to divorce.
1. You assumed the seller’s obligation
you sell your home within a 9-year period,
on a QMB-funded loan, provided that you
you either sell according to certain terms
Destruction by casualty. If your home is
were qualified to obtain a loan from the
or share any gain with the QSML
destroyed by fire, storm, flood, or other
proceeds of a QMB, or
governmental lender. See section
casualty, there generally is no recapture
143(k)(10). If you had a QSML, see the
2. The seller’s MCC was transferred
tax if you replace the home (for use as
line 13 instructions on page 2.
to you with the approval of the issuer and
your main home) on its original site within
both the following apply:
2 years after the end of the tax year when
Refinancing your home. Proceeds from
a. You met the eligibility requirements
the destruction happened. The
a QMB cannot be used to refinance a
needed to get an MCC, and
replacement period is 5 years, instead of
home mortgage. However, replacement
2 years, if the home was in the Hurricane
of construction period, bridge, or similar
b. The issuer of the MCC issued you
Katrina disaster area and was destroyed
a replacement MCC.
temporary financing used when you first
by reason of the hurricane after August
purchased your home is not treated as
24, 2005. If you do not replace the home
Recapture Tax
in time, you must file Form 8828 with
If, once you have received permanent
Form 1040X, Amended U.S. Individual
If you sold or otherwise disposed of your
financing from the proceeds of a QMB,
Income Tax Return, for the year the home
home during the first 9 years after you
the home is refinanced (with conventional
was destroyed.
received a federally subsidized QMB or
financing), the federal subsidy on your
MCC loan, you may have to pay back
Two or more owners. In general, if two
original QMB loan is subject to recapture
(recapture) all or part of the federal
or more persons own a home and are
when you sell or dispose of your home
mortgage subsidy you received by
jointly liable for the federally subsidized
within the 9-year recapture period. If you
increasing your federal income tax for the
mortgage loan, figure the actual recapture
refinance within the first 4 years after the
year in which you sold or disposed of your
tax separately for each, based on the
closing date of the original loan, you have
home. Refinancing of a federally
interest of each in the home.
to adjust your holding period percentage
subsidized loan without a sale or
(see the worksheet for line 20 on page 3)
Qualified rehabilitation loan. A qualified
disposition of the home does not result in
as if your loan was fully repaid on the
rehabilitation loan (QRL) is a loan funded
recapture, but a later sale or disposition
date of the refinancing.
by a QMB for the rehabilitation of a home
after the refinancing may result in
provided that:
An MCC can be reissued in a
There were at least 20 years between
refinancing if all of the following
the date of the building’s first use and the
conditions are met.
Who Must File
date rehabilitation began,
1. The issuer reissues an MCC to
A certain percentage of the walls and
You must file this form if all of the
replace your existing MCC, which can be
framework was retained in place,
following apply. (For exceptions, see
the original MCC, an MCC issued to a
The rehabilitation costs amounted to 25
Special Rules on this page.)
transferee under Regulations section
percent or more of your adjusted basis in
1.25-3(p), or an MCC previously reissued
You sold or otherwise disposed of your
the building after the rehabilitation, and
under the refinancing provisions.
home (whether or not you realized a
You were the first occupant of the
2. The reissued MCC takes effect
home after the rehabilitation was
beginning with the date you refinanced
Your original mortgage loan was
your home (refinancing closing date).
provided after December 31, 1990.
3. The reissued MCC:
You received a federal mortgage
If you sold or disposed of this
subsidy (see Federal Mortgage Subsidy
rehabilitated building that was your home
a. Applies to the same property as
within 9 years after you received the QRL,
your existing MCC,
Cat. No. 14075L


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