The full explanation
According to the IRS, it applies if you sell within the early years the law sets, and it depends on whether you made money on the sale and whether your income is above a certain limit. It is figured on Form 8828 and added to your tax for the year of the sale, even if the gain is excluded from income.
An example
Nidia bought her home with an MCC and sells it a few years later. When doing her taxes, she fills out Form 8828: because she had no gain on the sale, she does not owe the recapture tax.
You will see it in…
- IRS Form 8828, attached to your tax return
- Your mortgage credit certificate (MCC) paperwork
- IRS Publications 523 and 530 on selling and buying a home
