Home : Programs and Services : Homebuyer Assistance : Understanding Recapture Tax

What is recapture?

Basically, it is a tax that borrowers may have to pay on their federal income tax returns when they sell their MaineHousing financed homes. Owners of homes financed with mortgage revenue bonds (MRBs) receive the benefit of lower-than-market-rate interest loans. Under certain conditions, recapture enables the government to recoup some of the subsidy that the borrower enjoyed as the result of obtaining a MaineHousing single family mortgage loan.

What are the conditions where recapture applies?

A borrower will owe recapture tax only if all of the following are true:

• Sells home within 9 years.
• Realizes a gain from the sale.
• Earns significantly more income than when they bought the home. Homeowner's income in relation to the "Adjusted Qualifying Income Limits" in the year of the sale. Income limits are set by statute and are adjusted annually by 5%.

How much recapture will a homeowner have to pay?

Most borrowers will not have to pay any recapture tax. For others, the amount will be minimal. The maximum tax is 6.25% of the original loan amount or 50% of the gain on the sale whichever is less. Gain is calculated after items such as realtor, legal and closing fees have been deducted from the proceeds of the sale.

Recapture tax is figured on a scale based on the number of years the homebuyer has lived in the house Example:   Original Loan Amount: $100,000 Home sold in year 3; seller realized a $10,000 gain Maximum Tax: $100,000 x 3.75% = $3,750

When the program serves those it is intended for, recapture is seldom a risk. For most, the financial benefits of homeownership - deductions for mortgage interest and taxes as well as the MRB benefit of below market interest rates - far outweigh the risks of recapture.

Recapture Tax Charts

To check to see if your income has increased above the limits, please see the charts below. If you do not find a chart that covers the date you purchased your home, please email us at myfirsthome@mainehousing.org.

	May 6th, 2009 - Present
	March 14th, 2008 - May 5th, 2009
	April 20th, 2007 - March 13th, 2008
	April 7th, 2006 - April 19th, 2007
	March 14th, 2005 - April 6th, 2006
	July 15th, 2004 - March 13th 2005
	March 1st, 2004 - July 14th, 2004
	March 25th, 2003 - February 29th, 2004
	March 1st, 2002 - March 24th, 2003
	September 1st, 2001 - February 28th, 2002
	May 7th, 2001 - August 31st, 2001
	August 15th, 2000 - May 6th, 2001
	April 8th, 2000 - August 14th, 2000
	February 26th, 1999 to April 7th, 2000