Form 8828: When Selling a Federally Subsidized Home Triggers a Recapture Tax
Published November 5, 2026
Some home loans came with help from the federal government. The two types are a mortgage loan paid for with tax-exempt bond proceeds and a mortgage credit certificate. If you sell that home within the first 9 years, you may owe a recapture tax. Form 8828 is the form that figures it.
This guide explains when the form applies. It is general information. The instructions have the full rules, including the special cases.
What recapture means
If you sell or otherwise dispose of your home during the first 9 years after you got a federally subsidized loan, you may have to pay back all or part of the subsidy. You do this by adding the recapture tax to your federal income tax for the year you sold the home.
Replacing a subsidized loan with a new one, without a sale, does not trigger recapture. A later sale after that replacement may.
Who must file
You must file Form 8828 if all three of these apply. There are exceptions, which the instructions explain.
- You sold or otherwise disposed of your home, whether or not you made a gain.
- Your original mortgage loan was provided after December 31, 1990.
- You received a federal mortgage subsidy.
The two subsidy types
Part I, line 2 asks which type you had:
- Line 2a: A mortgage loan from the proceeds of a tax-exempt bond.
- Line 2b: A mortgage credit certificate.
If neither box applies, you are not subject to recapture tax. Do not complete the form. If the original loan closed before January 1, 1991, the recapture tax does not apply, and you do not complete the form either.
The main steps
Form 8828 has three steps. Each step builds on the last.
- Part I: Describe the home and the loan. Give the dates of the loan closing and the sale. Figure the number of years and full months between them.
- Part II, lines 9 through 14: Figure your gain from the sale, then take 50 percent of that gain on line 14.
- Part II, lines 15 through 23: Compare your modified adjusted gross income and adjusted qualifying income. Figure the income percentage on line 18. The federally subsidized amount is on line 19. The instructions say it is 6.25% of the highest amount of the subsidized loan. Multiply and enter the recapture amount. The tax on line 23 is the smaller of line 14 or line 22.
The form says to include the line 23 amount on Schedule 2 (Form 1040), line 17b. Check the current form for the exact line.
Income percentage
If the amount on line 17 is $5,000 or more, enter 100 on line 18. Otherwise, divide the line 17 amount by $5,000 and enter the result as a percentage, rounded to the nearest whole percent.
Where and when to file
Attach Form 8828 to your Form 1040, 1040-SR, or 1040-NR for the year you sold or otherwise disposed of the home. File it with your return when the return is due, including extensions.
Special rules
Some situations have their own rules. These include giving away the home, certain rehabilitation loans, and some reissued certificates after a loan is replaced. Read the instructions before you finish the form. If you gave your home away, other than to a spouse or former spouse incident to divorce, the instructions give a separate way to figure the recapture.
A simple example
Suppose you bought a home with a mortgage credit certificate and sold it four years later at a gain. Form 8828 asks for the loan dates, the sale date, your gain, and your income. The result depends on the lines above. This example is made up to show the steps.
Related reading
For mortgage interest rules on a regular return, read Mortgage Interest Deduction and Form 1098: The Basics.
Next steps
Find your original loan papers, the bond or certificate notice, and your sale closing statement. Then read the instructions. If the numbers are complex or the loan has an unusual history, ask a tax professional who works with home sales.
Sources: Sources: IRS, Form 8828 (Rev. November 2024) (https://www.irs.gov/pub/irs-pdf/f8828.pdf); IRS, Instructions for Form 8828 (Rev. November 2024) (https://www.irs.gov/pub/irs-pdf/i8828.pdf) This is general information, not advice about your specific return.
