Updated October 19, 2026. Quick answer: Form 8828 figures and reports the recapture tax on a federal mortgage subsidy when a federally subsidized home is sold or otherwise disposed of. The instructions say the tax can apply to a sale during the first 9 years, and the form is attached to the return for the year of the sale.
Quick reference
| Item | As the IRS form or instructions state it |
|---|---|
| Form and edition read | Form 8828 (Rev. November 2024), Recapture of Federal Mortgage Subsidy |
| What it does | “Use this form to figure and report the recapture tax on the mortgage subsidy if you sold or otherwise disposed of your federally subsidized home.” |
| Recapture window | “If you sold or otherwise disposed of your home during the first 9 years after you received a federally subsidized QMB or MCC loan” |
| Loan date test | “Your original mortgage loan was provided after December 31, 1990.” |
| Tax cap on line 14 | “Multiply line 13 by 50% (.50)” |
| Income percentage threshold | “If the amount on line 17 is $5,000 or more, enter “100.”” |
| Federally subsidized amount | “It is equal to 6.25% of the highest amount of the loan that was federally subsidized.” |
| Where the tax goes | “Also, include this amount on Schedule 2 (Form 1040), line 17b” |
What Form 8828 is for and who files it
The instructions open with the purpose: “Use this form to figure and report the recapture tax on the mortgage subsidy if you sold or otherwise disposed of your federally subsidized home.” A subsidy exists if there was either a “A mortgage loan (including a qualified rehabilitation 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 your mortgage loan that you could use to reduce your federal income taxes.”
The filing test is “You must file this form if all of the following apply.” The conditions are “You sold or otherwise disposed of your home (whether or not you realized a gain).” “Your original mortgage loan was provided after December 31, 1990.” and “You received a federal mortgage subsidy”.
The form repeats the date limit: “If the date of closing of the loan was before January 1, 1991, recapture tax does not apply.” “If neither box applies, you are not subject to recapture tax on the sale or other disposition of your home.”
When and where to file
The instructions say “Attach Form 8828 to your Form 1040, 1040-SR, or 1040-NR for the tax year in which you sold or otherwise disposed of your home.” “File it with your tax return when it’s due (including extensions).”
The size of the exposure is tied to time: “you may have to pay back (recapture) all or part of the federal mortgage subsidy you received by increasing your federal income tax for the year in which you sold or disposed of your home.”
Special rules in the instructions
A home given away is treated as a sale, other than a gift to a spouse or ex-spouse incident to divorce: “you must figure your recapture tax as if you had actually sold your home for its fair market value at the time of the disposition.”
Transfers between spouses in a divorce can avoid the form, but only if the listed conditions are met, including that the transfer is incident to divorce and that no gain or loss was included in or deducted from income on the return: “The transfer of an interest in the home by one spouse (or former spouse) to another does not result in recapture tax to either person (do not file this form) if:”
Co-owners figure the tax separately. The instructions use this example: “Dwaine has a 75% ownership interest in a house and his daughter, Dara, has the remaining 25% ownership interest.”
A home destroyed by casualty is treated differently: “there generally is no recapture tax if you replace the home (for use as your main home) on its original site.” “In general, the period for replacement is limited to 2 years after the end of the tax year when the destruction happened.”
Improvement loans are separate: “A QHIL is limited to $15,000” and for a rehabilitation loan one test is “The rehabilitation costs amounted to 25 percent or more of your adjusted basis in the building after the rehabilitation”.
Part I: lines 1 to 8
Part I describes the home. The instructions say the details come from a notice: “If your home was financed with a federally subsidized loan, you should have received notification in writing from the bond issuer or the lender at the time your mortgage was provided.”
Line 1 is “List the address of the property that was subject to the federally subsidized debt, not your current address as shown on your tax return (if different).” Line 5 is the original loan date, and the form says “Number of years and full months between original closing date (line 5) and date of sale or disposition (line 6):” for line 7.
Part II: lines 9 to 23
Lines 9 through 13 find the gain. Line 13 stops the form early for a loss: “If a loss, stop here and attach this form to your Form 1040. You do not owe recapture tax”. Line 14 is “Multiply line 13 by 50% (.50)”.
Lines 15 through 18 are the income test. “Subtract line 16 from line 15. If zero or less, stop here and attach this form to your Form 1040.” Line 18 reads “If the amount on line 17 is $5,000 or more, enter “100.””
The line 19 instructions say “It is equal to 6.25% of the highest amount of the loan that was federally subsidized.” Line 20 is the holding period percentage taken from the notice table, with a worksheet for one case: “If the repayment date on line B is more than 4 years after the closing date on line A, do not use this worksheet.”
The result is the smaller of two amounts: “Enter the smaller of line 14 or line 22.” “Also, include this amount on Schedule 2 (Form 1040), line 17b”.
Where to go next
Buyers who held a Mortgage Credit Certificate can read the credit side on the Form 8396 page. Home sale reporting is covered on the Form 1099-S page and the Form 8949 page, and the tax lands on the Schedule 2 page.
Where this comes from
The editions read for this page are Form 8828 (Rev. November 2024) and the Instructions for Form 8828 (Rev. November 2024), which are the revisions irs.gov served when they were read on 2026-10-19. Check the revision printed on the form you file, because a later revision can change the lines and the percentages. This page describes Form 8828 (Rev. November 2024), Recapture of Federal Mortgage Subsidy; Instructions for Form 8828 (Rev. November 2024), as served on irs.gov on October 19, 2026. The IRS can revise a form after we read it, and the form you file and its own instructions control. Current and earlier revisions are listed on the IRS page Forms, Instructions and Publications. General information, not tax or legal advice.
Common mistakes
- Assuming only a sale triggers the form. The instructions say “sold or otherwise disposed of your home”
- Assuming a loss means the form is not needed. The form says to attach it for a loss: “stop here and attach this form to your Form 1040.”
- Assuming a refinance alone triggers recapture. The instructions say “Refinancing of a federally subsidized loan without a sale or disposition of the home does not result in recapture”
- Treating a divorce transfer as always taxable. The instructions say it does not result in recapture tax “(do not file this form) if:” the listed conditions are met.
Related: Form 8396, Form 1099-S, Form 8949, Schedule 2 (Form 1040), Schedule D (Form 1040), and Form 8949 code H.
Sources
- Form 8828 (Rev. November 2024), Recapture of Federal Mortgage Subsidy: https://www.irs.gov/pub/irs-pdf/f8828.pdf
- Instructions for Form 8828 (Rev. November 2024): https://www.irs.gov/pub/irs-pdf/i8828.pdf
Read from the IRS pages linked above on October 19, 2026. General information, not tax or legal advice. The IRS form and the instructions for your own form control, and your own facts decide the outcome.