Recapture Tax
For loans closed on or after August 15, 2006, SDHDA agrees that if you are required to pay a Recapture Tax to the Internal Revenue Service (IRS) calculated according to the provisions described above or below, SDHDA will reimburse you for the actual amount of the Recapture Tax paid to the IRS.
How does a Mortgagor receive reimbursement for the Recapture Tax that was paid?
In order to be reimbursed for Recapture Tax paid, you must send your written request to SDHDA no later than July 15 of the calendar year immediately following the calendar year in which you sold or otherwise disposed of your home. For example, if you sell your home on August 15, 2007, SDHDA must receive your written request for reimbursement no later than July 15, 2008.
The request for reimbursement must include the following original documents signed by each Mortgagor (SDHDA will not accept copies or facsimiles of these items):
- SDHDA’s Request for Recapture Tax Reimbursement form
- IRS Form 4506 (or its equivalent) permitting SDHDA to obtain a copy of each Mortgagor’s federal tax return, including IRS Form 8828 (or its equivalent). SDHDA will pay any fees associated with obtaining your tax returns from the IRS; and
- Any other documentation SDHDA may need to approve your request.
In addition to receiving the items described above, SDHDA’s approval of your Recapture Tax reimbursement is subject to the following terms and conditions:
- Your SDHDA‑financed mortgage loan must be outstanding at the time you sell your home (i.e. SDHDA will not reimburse you for any Recapture Tax if the mortgage loan has been refinanced).
- SDHDA will reimburse you for the actual amount of the recapture tax you paid. SDHDA will not reimburse for any fees, interest, expenses or penalties incurred.
- SDHDA will not calculate the amount of any Recapture Tax you may owe upon the sale or disposition of your home. If you need assistance, you should consult a personal tax advisor or the IRS.
- You may submit only one request for reimbursement. SDHDA will not reimburse you for any additional Recapture Tax you may owe under an amended tax return.
SDHDA’s reimbursement of your Recapture Tax may constitute income to you for federal and/or state income tax purposes. You may owe taxes on this additional income. SDHDA will not provide you with additional moneys to pay such taxes. If you have questions regarding the treatment of the reimbursement of the Recapture Tax for tax purposes, you should consult with your personal tax advisor or the IRS.
Request for Recapture Tax Reimbursement
