Federal Subsidy Recapture


Federal Subsidy Recapture
The Federal subsidy recapture is the repayment of all or part of a federal mortgage subsidy if the home is sold or otherwise disposed of within nine years of receiving a federally-subsidized loan. If a home is financed using a federally-subsidized program, all or part of the benefit received from the program may need to by repaid (recaptured) by increasing the federal income tax for the year of the sale.

A federal mortgage subsidy occurs when a homebuyer receives:

  • A mortgage loan that had a lower interest rate than was usually charged because it was funded from a tax-exempt qualified mortgage bond (QMB) issue; or
  • A mortgage credit certificate (MCC) with the mortgage loan that can be used to reduce the homebuyer's federal income taxes; or
  • An assumed seller's obligation on a QMB-funded loan, provided the homebuyer is qualified to obtain a loan from the proceeds of a QMB; or
  • The seller's MCC that is transferred with the approval of the issuer, and the homebuyer meets the eligibility requirements for the MCC.

Investment dictionary. . 2012.

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