Each year in January, a year-end summary for the previous year will be mailed to WHEDA Mortgage-holders. This document will show the mortgage interest paid during the year, ending principal and escrow balances, late charges due, and escrow interest earned.
What is it? When does it apply?
Borrowers who receive financing through WHEDA with the FIRST TIME HOME BUYER Program, VALOR Program OR were issued a MORTGAGE CREDIT CERTIFICATE* when they purchased their home concurrent with the WHEDA ADVANTAGE Program, may have to pay a "recapture" tax to the federal government following the sale of their home.
WHEDA borrowers do not have to be concerned about federal recapture tax due to the WHEDA Recapture Tax Guaranty. Effective for WHEDA loans funded on or after April 1, 2013 that are subject to a federal recapture tax, WHEDA will reimburse home buyers for the actual amount of recapture tax paid to the IRS when they sell their WHEDA financed
home. WHEDA recommends consulting a tax professional to determine if the recapture tax applies.
*For borrowers who receive an MCC Certificate and their first mortgage financing is not a WHEDA first mortgage, the recapture reimbursement from WHEDA does not apply.
Recapture tax is paying back the federal government for the benefit of a lower interest mortgage loan. When tax-exempt mortgage bonds are used for financing, the borrower receives a benefit.
Recapture applies when and if:
Borrowers calculate recapture tax using IRS Form 8828. For assistance see also, IRS Publication 523 “Selling Your Home,” available on the IRS website at: www.irs.gov.
A copy of the income limits for Wisconsin can be found on WHEDA.com.
Whether or not recapture tax is due, borrowers must
file IRS Form 8828 with their federal income tax
returns for the year in which their home is sold. For
example, if a home is sold in 2016, IRS Form 8828
must be filed with the homeowner’s 2006 income tax
returns in 2017. Recapture tax is paid at the time
income tax returns are filed.
Recapture tax is due when a home is disposed of (sold)
due to the death of the homeowner.
A request for recapture tax reimbursement must be
received by the Wisconsin Housing & Economic
Development Authority (WHEDA) within six months of
the filing of your federal income tax filing date and
incurring the Recapture Tax liability. Exhibit 7
“Recapture Tax Reimbursement” can be found on
IRS information/forms online at: www.irs.gov
The links below are provided to you so that when it's time to sell your home, you have the information you need to complete IRS Form 8828 – Recapture of Federal Mortgage Subsidy. Completion of Form 8828 will determine whether the tax applies to you, and the amount of the tax you will pay, if any.
WHEDA's Schedule of Fees and Costs that are charged for loan-related services, subject to change to applicable law.
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