Recapture Tax

Borrowers who buy their homes using the First-time Homebuyer Program may be subject to a Recapture Tax.

Borrowers repay the government a portion of their gain on the sale of their home, depending on (1) whether there is a gain on the sale, (2) the household income at the time of sale, and (3) if the sale occurs within nine years of buying the home. Recapture Tax is paid directly to the IRS when filing taxes for the year in which the home is sold.

Nothing in the Recapture Tax provisions should prevent using of SDHDA's First-time Homebuyer Program.

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) and your first mortgage was with SDHDA, SDHDA will reimburse you for the actual amount of the Recapture Tax paid to the IRS.