WHEDA borrowers do not have to be concerned about federal recapture tax. Effective for WHEDA loans funded on or after April 1, 2013 with an MCC Certificate, WHEDA will reimburse home buyers for the actual amount of recapture tax paid to the IRS when they sell their WHEDA financed home.
Recapture tax is a federal tax a homeowner may have to pay if they were issued an MCC Certificate when they purchased their home. It applies to borrowers if they sell their home within the first nine (9) years of the purchase date, receive a net profit on the sale of the home, and exceed the maximum WHEDA household income limit at the time of sale. All three provisions must occur at the time of sale for any potential recapture tax obligation to apply.
If your tax professional has determined that you are subject to recapture, contact WHEDA after you have completed and filed your tax return for the year the home was sold.
For borrowers who receive a first mortgage financing for a non-WHEDA first mortgage with an MCC Certificate, the recapture reimbursement from WHEDA does not apply.