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Homeowner Tax Information

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.

Federal Recapture Tax

The Facts About Federal Recapture Tax and WHEDA Guaranty

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 CONVENTIONAL 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 provided to Borrowers via WHEDA Form 4 Acknowledgement of Federal Recapture Tax Requirements. 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.

When does recapture apply? Recapture applies when and if all three occur:
  1. The borrower sells the home within the first nine full years of ownership.
  2. The borrower realizes a capital gain on the sale of the home.
  3. The borrower’s income increases above the federal allowable limits at the time of sale.
No recapture tax is due unless all three occur.
What is recapture? Recapture tax is paying back the federal government for the benefit of a lower interest mortgage loan, where tax-exempt mortgage bonds were used for financing.
How is the tax calculated? 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.
What are the federal allowable income limits & where are they found? A copy of the federal allowable income limits for Wisconsin can be found on www.WHEDA.com. The income limits are listed for each year of ownership in which recapture tax may be due.
When is recapture tax paid? 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. Recapture tax is paid at the time income tax returns are filed.
What happens if a Borrower dies within the nine-year period? No recapture tax is due when a home is disposed of (sold) due to the death of the homeowner.
How do borrowers get reimbursed from WHEDA? Exhibit 7 “Recapture Tax Reimbursement” request must be received by the Wisconsin Housing & Economic Development Authority (WHEDA) within six months of the date of filing of your federal income tax and incurring the Recapture Tax liability. Exhibit 7 “Recapture Tax Reimbursement” can be found on www.WHEDA.com Forms and Exhibits.
Find out more. 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.

Mortgage-holder Fee Schedule

WHEDA's Schedule of Fees and Costs that are charged for loan-related services, subject to change to applicable law.

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