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 earlier). 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 Attach your Form 8828 to the Form 1040, loan funded by a QMB for the

Use this form to figure and report the U.S. Individual Income Tax Return, for the rehabilitation of a home provided that:

recapture tax on the mortgage subsidy if tax year in which you sold or otherwise • There were at least 20 years between

you sold or otherwise disposed of your disposed of your home. File it when the the date of the building’s first use and the

federally subsidized home. Form 1040 is due (including extensions). date rehabilitation began,

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 Giving away your home. If you gave the building after the rehabilitation, and benefits.

away your home (other than to your • You were the first occupant of the • A mortgage loan (including a qualified spouse or ex-spouse incident to divorce), home after the rehabilitation was rehabilitation loan) that had a lower you must figure your recapture tax as if completed. interest rate than was usually charged

because it was funded from a tax-exempt you had actually sold your home for its If you sold or disposed of this

qualified mortgage bond (QMB) issue. fair market value at the time of the rehabilitated building that was your home

• A mortgage credit certificate (MCC) disposition. within 9 years after you received the QRL,

with your mortgage loan that you could Divorce. The transfer of an interest in you must recapture the federal mortgage

use to reduce your federal income taxes. the home by one spouse (or former subsidy. See section 143(k)(5) for details.

spouse) to another does not result in Special rules may apply for certain You may also have a federal mortgage recapture tax to either person (do not file residences destroyed in a federally subsidy if, when you bought your home, this form) if: declared disaster. See section either: • 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 See Pub. 504, Divorced or Separated subsidy if instead of a QRL you received proceeds of a QMB, or Individuals, for situations where gain or a qualified home improvement loan 2. The seller’s MCC was transferred loss is included in or deducted from (QHIL) funded by a QMB. A QHIL is to you with the approval of the issuer and income on the transfer incident to divorce. limited to $15,000 and must be used for both the following apply: Destruction by casualty. alterations, repairs, and improvements 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 casualty, there generally is no recapture or energy efficiency of your home. See 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 If you sold or otherwise disposed of your that can be made in addition to any QMB

home during the first 9 years after you you do not replace the home in time, you or MCC federally subsidized financing. To must file Form 8828 with Form 1040X, received a federally subsidized QMB or receive a QSML, you must agree that if

MCC loan, you may have to pay back Amended U.S. Individual Income Tax you sell your home within a 9-year period,

(recapture) all or part of the federal Return, for the year the home was you either sell according to certain terms

mortgage subsidy you received by destroyed. or share any gain with the QSML

increasing your federal income tax for the In certain circumstances, the governmental lender. See section

year in which you sold or disposed of your replacement period may be extended if 143(k)(10). If you had a QSML, see the

home. Refinancing of a federally the home is located in a federally line 13 instructions on page 2.

subsidized loan without a sale or declared disaster area and is destroyed Refinancing your home. Proceeds from

disposition of the home does not result in by reason of that disaster. For more a QMB cannot be used to refinance a

recapture, but a later sale or disposition information, see Pub. 547, Casualties, home mortgage. However, replacement after the refinancing may result in Disasters, and Thefts. of construction period, bridge, or similar

recapture. Two or more owners. In general, if two temporary financing used when you first

or more persons own a home and are purchased your home is not treated as

Who Must File jointly liable for the federally subsidized refinancing.

You must file this form if all of the If, once you have received permanent mortgage loan, figure the actual recapture

following apply. (For exceptions, see financing from the proceeds of a QMB, tax separately for each, based on the

Special Rules interest of each in the home. 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

gain). 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
closing date of the original loan, you have subsidized debt, not your current address the cost of the property plus purchase

to adjust your holding period percentage as shown on your Form 1040. commissions and improvements, minus

(see the worksheet for line 20 on page 3) depreciation. Do not reduce the adjusted Line 2. Check the applicable box on line as if your loan was fully repaid on the basis for any gain that you did not 2 from the information on the notification date of the refinancing. recognize on the sale of a previous home. given to you at the time you took out the An MCC can be reissued in a loan. If you received your home, or interest refinancing if all of the following Line 3. Fill in the requested information in a home, incident to a divorce, your conditions are met.

from the notification discussed above. If adjusted basis is generally the same as 1. The issuer reissues an MCC to you have a problem identifying the issuer, that of your spouse (or former spouse). replace your existing MCC, which can be contact your lender and ask for the the original MCC, an MCC issued to a information. For details on how to determine your transferee under Regulations section adjusted basis, get Pub. 551, Basis of 1.25-3(p), or an MCC previously reissued Line 4. Fill in the name and address of Assets. under the refinancing provisions. the bank or other lender that provided

2. The reissued MCC takes effect your original mortgage. Line 13. Enter “QSML” on the dotted line beginning with the date you refinanced to the left of the line 13 entry space if you Line 5. Fill in the month, day, and year your home (refinancing closing date). sold your home at a gain within the 9-year that your original federally subsidized 3. The reissued MCC: mortgage loan was provided. This recapture period and paid a share of that a. Applies to the same property as generally is the date of settlement on your gain to the QSML governmental lender. In your existing MCC, home. However, if the loan became the amount column for line 13, enter your b. Replaces entirely your existing federally subsidized debt at a later date, share of the gain. Attach a worksheet to MCC, use that date instead. your Form 8828 to explain how you c. Specifies a mortgage debt that calculated your share of the gain. Show does not exceed the outstanding debt Line 6. Fill in the applicable month, day, the date you paid the QSML balance on your existing MCC, and year. The settlement or closing date governmental lender its share of the gain d. Does not increase the certificate generally is the date of sale. However, and the amount of that share. See credit rate specified on the existing MCC, Form 8828 also applies to certain other Qualifying subordinate mortgage loan (or and dispositions of your home. For instance, grant) on page 1. e. Does not increase the allowable the date to enter on line 6 may be the

credit under your existing certificate for date you deeded the property to a relative Line 15. Figure your modified adjusted any tax year. (see Giving away your home under gross income as follows: Special Rules on page 1). Repayment of the loan. Your holding • Begin with: Your adjusted gross

Line 8. Enter the date the original income as shown on your Form 1040. period percentage (line 20) may be

reduced (see the line 20 instructions) if federally subsidized loan was fully repaid. • Add: Any tax-exempt interest that you

you: (This may be the same as the date of sale received or accrued for the tax year.

• Repay your loan in full or refinance or other disposition on line 6.) A • Subtract: Any gain included in your refinanced QMB loan is fully repaid on the other than with reissuance of an MCC (as gross income because of the disposition date of its refinancing (with conventional described earlier) within the first 4 years of your home. after the closing date of your original loan, financing). However, a refinanced MCC

and loan that met all the conditions specified Line 16. If your home was financed with earlier under Refinancing your home is • Sell or dispose of your home later a federally subsidized loan, you should considered an extension of the original during the 9-year recapture period. have received notification in writing from MCC loan. Do not enter the refinancing Other special rules may apply in the bond issuer or the lender at the time date for such an MCC on line 8. See certain cases. See section 143(m). your mortgage was provided. The Refinancing your home and the notification contains a table which lists instructions for line 20. adjusted qualifying income figures. Your

adjusted qualifying income is found in the Specific Instructions Part II—Computation of column of the table that corresponds to

Note. your family size (number of family If your home was financed with a Recapture Tax members living with you at the time of the federally subsidized loan, you should Note. You must report all required have received notification in writing from sale) on the line that corresponds to the information for your interest in the home. the bond issuer or the lender at the time number of full and partial years that you This may be less than 100% if someone your mortgage was provided. The held your home. else also has an interest in the home (see notification should state that your home Special Rules on page 1). Line 19. The federally subsidized was financed with a mortgage loan from amount should be found on the the proceeds of a tax-exempt bond or that Line 9. This item applies to both sales notification you received from the bond you received a mortgage credit certificate and other dispositions (see Giving away issuer or from your lender. It is equal to with your mortgage loan. The notification your home under Special Rules on page 6.25% of the highest amount of the loan should include information needed to 1). If your home was disposed of other

than by sale, the sales price is the fair that was federally subsidized. Enter the figure your recapture tax and it should

advise you to keep it for your records. market value of the home at the time of figure on line 19.

Name(s) and social security number. the disposition. You should report only the Line 20. You will find your holding period part of the sales price representing your The name(s) and social security number percentage on the same line of the table interest in the home (see Two or more on Form 8828 should be the same as from which you obtained your adjusted owners and Qualifying subordinate those shown on your Form 1040. mortgage loan (or grant) qualifying income (see line 16 under Special

Rules instructions). However, if you fully repaid Part I—Description of on page 1). the federally subsidized loan within 4

Home Subject to Federally Line 10. Include sales commissions, years of the closing date of the loan, and advertising, legal fees, etc., allocable to before selling or otherwise disposing of Subsidized Debt your interest in the home. your home, you will need to use the

worksheet on page 3 to redetermine your Line 1. List the address of the property Line 12. In general, the adjusted basis of holding period percentage for line 20. that was subject to the federally your interest in the home is your share of

-2- Instructions for Form 8828 (Rev. 12-2009)
B.

C.

D.

E.

F.

G.

H.

A.

B.

C.

D.

E.

F.

G.

H.

A.

%

Month Day Year

Years

Worksheet for figuring the holding period percentage if you fully repaid the original federally subsidized loan: (1) before the

date of sale or disposition of your home and (2) within the first 4 years after the closing date of the original loan. (Keep for

your records.) (Do not use this worksheet if lines 6 and 8 of Form 8828 are the same date.)

Closing date of original loan. Enter the date from Form 8828, line 5

Repayment date. Enter the date from Form 8828, line 8

Enter the number of years between the dates on lines A and B. Round up to the nearest whole

year

Sale date. Enter the date from Form 8828, line 6

Enter the number of years between the dates entered on lines B and E. Round up to the nearest

whole year

Multiply the percentage on line D by the percentage on line G. Round to the nearest whole

percentage. This is your adjusted holding period percentage to enter on line 20 of Form 8828. If

this percentage is zero, you will have no recapture, but you still must complete and file Form 8828

Month Day Year

Years

Month Day Year

If the repayment date on line B is more than 4 years after the closing date on line A, do not use

this worksheet.

1 20%

2 40%

3 60%

4 80%

If the number of years on line C is: Enter this percentage:

%

%

1 100%

2 80%

3 60%

4 40%

5 20%

If the number of years on line F is: Enter this percentage:

6 or more 0%

Instructions for Form 8828 (Rev. 12-2009) -3-