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Recapture Tax Reimbursement Policy

Recapture Tax Reimbursement Policy

For SDHDA First-time Homebuyer Loans closed on or after August 15, 2006, if you are required to pay a Recapture Tax to the Internal Revenue Service (IRS), 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 you have 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, 2014, SDHDA must receive your written request for reimbursement no later than July 15, 2015.

To request reimbursement of Recapture Tax you have paid, you must send the following original documents, signed by each Mortgagor (SDHDA will not accept copies or faxes), to SDHDA:

  1. pdf Statement of Recapture Tax Reimbursement (79 KB)
  2. pdf Request for Recapture Tax Reimbursement (25 KB)
  3. pdf IRS Form 4506-T (73 KB)  (permits SDHDA to obtain a copy of each Mortgagor’s federal tax return and any corrections and/or Addendums) SDHDA will pay any fees associated with obtaining a copy of the mortgagor's tax returns and/or addendums.
  4. pdf IRS Form 8821 (90 KB)  (permits SDHDA to discuss the Mortgagor's Recapture Tax payment with an IRS Agent)
  5. Settlement Statement (HUD-1) from the sale of the property
  6. Complete copy of the IRS Federal Tax Return for the year in which the property was sold also to include all forms.
  7. Copy of the check made out to the IRS and showing deposited by the IRS.
  8. Any other documentation SDHDA may need to approve your request.

SDHDA’s approval of Recapture Tax reimbursement is subject to all terms and conditions contained in the Request for Recapture Tax Reimbursement form.

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 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.

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