DEFINITION of 'Federal Subsidy Recapture'

The Federal subsidy recapture is the repayment of all or part of a federal mortgage subsidy if the home is sold or otherwise disposed of within nine years of receiving a federally-subsidized loan. If a home is financed using a federally-subsidized program, all or part of the benefit received from the program may need to by repaid (recaptured) by increasing the federal income tax for the year of the sale.

BREAKING DOWN 'Federal Subsidy Recapture'

A federal mortgage subsidy occurs when a homebuyer receives:


  • A mortgage loan that had a lower interest rate than was usually charged because it was funded from a tax-exempt qualified mortgage bond (QMB) issue; or

  • A mortgage credit certificate (MCC) with the mortgage loan that can be used to reduce the homebuyer's federal income taxes; or

  • An assumed seller's obligation on a QMB-funded loan, provided the homebuyer is qualified to obtain a loan from the proceeds of a QMB; or

  • The seller's MCC that is transferred with the approval of the issuer, and the homebuyer meets the eligibility requirements for the MCC.
RELATED TERMS
  1. Mortgage Subsidy Bond

    One of the few types of municipal bonds ever issued that may ...
  2. Form 8396: Mortgage Interest Credit

    A tax form distributed by the Internal Revenue Service (IRS) ...
  3. Subsidy

    A benefit given by the government to groups or individuals usually ...
  4. Longtime Homebuyer Tax Credit

    The Longtime Homebuyer Tax Credit was a federal income tax credit ...
  5. Combination Loan

    1. A transaction consisting of two separate loans for the same ...
  6. Home Mortgage

    A home mortgage is a loan given by a bank, mortgage company or ...
Related Articles
  1. Taxes

    What's a Subsidy?

    A subsidy is a benefit given to an individual, business or institution, typically by the government. Subsidies are given to promote a social good or an economic policy. The government usually ...
  2. Personal Finance

    Shopping for a Mortgage in 2017? Use This Tool First

    As home-buying technology has progressed, the process of finding the best mortgages rates for 2017 can all be done online.
  3. Retirement

    Know How a Reverse Mortgages Work?

    The basics of getting a reverse mortgage, with detailed information on how to qualify and what to watch out for.
  4. Personal Finance

    How to Get a No Down Payment Mortgage

    There are only a few ways to get out of making a down payment, but the requirements are strict.
  5. Retirement

    The Reverse Mortgage: A Retirement Tool

    Discover another way to fund your retirement without having to make payments on a loan.
  6. Personal Finance

    Reduce Interest With An All-In-One Mortgage

    "Offset" mortgages combine a checking account, home-equity loan and mortgage into one account.
  7. Personal Finance

    Conventional Mortgage

    A conventional mortgage is any type of homebuyer's load that is not offered or secured by a government entity but rather available through a private lender.
  8. Personal Finance

    Finding the Best Mortgage Rates in 2017

    As home-buying technology has progressed, the process of finding the best mortgages rates can all be done online. Here's how:
  9. Personal Finance

    Reverse Mortgage Pros and Cons

    It's a way to use your home equity for help when you're older. But does it make sense for your family? Here's how to tell and how to protect your spouse.
RELATED FAQS
  1. How are subsidies justifiable in a free market system?

    Learn some of the arguments in favor of or against providing subsidies in a market economy, including economic and political ... Read Answer >>
  2. How do government subsidies help an industry?

    Understand how government subsidies can help an industry, on both the consumer and supplier side. Learn the potential drawback ... Read Answer >>
Trading Center