CHFA would like to announce an exciting new benefit for our borrowers - Recapture Tax Reimbursement.  If you are worried about the possibility of paying the Federal Recapture Tax, don’t be.  If you are required to pay that tax when you sell your home, CHFA will reimburse you for the full amount of the Federal Recapture Tax that you actually paid.

CHFA is offering this benefit because the Federal Recapture Tax is complex and often causes confusion and concern.  Through this reimbursement, we are removing yet another obstacle to homeownership.

Below you will find answers to most of your questions regarding CHFA’s Recapture Tax Reimbursement plan.  If, however, you have additional questions, please contact us at 888.320.3688.  We will be happy to discuss this exciting new plan with you.

What is the Federal Recapture Tax?

Some CHFA mortgage loan programs are funded with tax exempt mortgage revenue bonds. If you use these programs, you are receiving the benefit of a lower interest rate than is customarily charged on other mortgage loans. This benefit is "recaptured" through higher federal income taxes in the year you sell or otherwise dispose of your home.  Information on (IRS Form 8828, Recapture of Federal Mortgage Subsidy)

How do I know if I have to pay the Federal Recapture Tax?

You may owe the Federal Recapture Tax if all three of these conditions apply:

1. You sell or otherwise dispose of your home within nine years of closing the mortgage loan.
2. Your income in the year you dispose of your home has increased and exceeds the limits established by the IRS.
3. You profit from the sale.

You must complete IRS Form 8828, Recapture of Federal Mortgage Subsidy, to determine if you owe the Federal Recapture Tax.

When do I pay the Federal Recapture Tax?

The potential for paying the Federal Recapture Tax only applies when you sell or otherwise dispose of your home. You pay it when you file your tax returns for the year in which you sell or dispose of your home.

Does CHFA’s Recapture Reimbursement plan mean I do not have to pay the Federal Recapture Tax?

No.  You are still responsible for accurately paying any and all taxes to the IRS.  CHFA will reimburse you for the actual amount you owe and paid in Recapture Tax.

What are the guidelines to be eligible for reimbursement?

• Your home was sold after September 5, 2006.
• Your loan was financed with CHFA qualified mortgage revenue bonds.  The reimbursement does not apply to Mortgage Credit Certificate (MCC) holders.
• You submit CHFA Form 950, Request for Recapture Tax Reimbursement.
• You must submit the request no later than December 31st of the year the Federal Recapture Tax is paid. For example, if the house sold in 2006, the tax return is filed in 2007. The reimbursement request must be submitted no later than December 31, 2007.

How do I apply for reimbursement?

It’s easy.  Simply fill out CHFA Form 950, Request for Recapture Tax Reimbursement, and provide the following documents:

• A copy of signed and filed Federal Tax return showing the Recapture Tax;
• A completed and signed IRS Form 4506, Request for Copy of Tax Return;
• IRS Form 8828, Recapture of Federal Mortgage Subsidy ;
• HUD-1 Settlement Statement showing disposition of your home;
• Proof those taxes were paid, such as a copy of a cancelled check or bank statement.

Mail the above documents and CHFA Form 950 to: 

Colorado Housing and Finance Authority
Home Finance Division
Attn: Recapture Tax Reimbursement
1981 Blake Street
Denver, CO 80202