Notice of Federal Subsidy Recapture Overview

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What is Recapture Tax?

You have received a mortgage loan financed with funds made available by MassHousing. The funds to finance this mortgage loan may have been raised through the sale of tax-exempt Mortgage Revenue Bonds (a "MassHousing MRB Loan"). The Federal Mortgage Subsidy Recapture Tax applies to these types of mortgages. MassHousing borrowers, who benefit from tax-exempt bonds through their low interest rates, may be required to pay a Recapture Tax if they sell their home within nine years.

When is the tax paid?

A borrower's tax liability is determined by a complex formula* that considers the amount of the mortgage; the length of time the mortgage is held; the growth in the property's value; and the growth in personal income a borrower experiences while owning the home.

To owe Recapture Tax at all, a borrower would have to:

1. Sell their home within nine years;
2. Earn significantly more income than when they purchased their home (See the Recapture Table for the year the home was purchased); and
3. Profit from the sale.

*For more detailed information on Federal Subsidy Recapture, please refer to the Borrower's Affidavit and Disclosure of Federal Subsidy Recapture First-Time Homebuyers Only Form (B-001) you signed at closing.

How often do borrowers have to pay Recapture Tax?

Because of the variables that affect tax liability, borrowers rarely have to pay Recapture Tax.

What if I do have to pay Recapture Tax?

If you do have to pay Recapture Tax, MassHousing will reimburse you for the full amount. This offer only applies to MassHousing loans closed on or after January 1, 2006.

How does MassHousing Recapture Relief work?

To obtain reimbursement, contact MassHousing Customer Service at 1-888-843-6432 after you pay the Recapture Tax. You will need to provide MassHousing with documentation about the sale of your home and the calculation and payment of the Recapture Tax, including a copy of your signed and filed federal tax return with IRS Form 8828, "Recapture of Federal Mortgage Subsidy." MassHousing will then reimburse you for the amount of the Recapture Tax actually paid to the IRS.

Disclosure: MassHousing DOES NOT provide tax advice on the calculation of Federal Subsidy Recapture. Please note that the amount reimbursed to you by MassHousing may constitute taxable income to you. Consult your tax advisor for further information.