| Instructions for Form 8828 |
2003 Tax Year |
Instructions for Form 8828 - Main Contents
This is archived information that pertains only to the 2003 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.
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.
You have a federal mortgage subsidy if you received either of the
following benefits:
- 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.
- A mortgage credit certificate (MCC) with your mortgage loan
that you could use to reduce your Federal income taxes.
You may also have a federal mortgage subsidy if, when you bought
your home, either:
- You assumed the seller's obligation on a QMB-funded loan,
provided that you were qualified to obtain a loan from the proceeds of
a QMB, or
- The seller's MCC was transferred to you with the approval of
the issuer and both the following apply:
- You met the eligibility requirements needed to get an MCC,
and
- The issuer of the MCC issued you a replacement MCC.
If you sold or otherwise disposed of your home during the first 9
years after you received a federally subsidized QMB or MCC loan, 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. Refinancing of a
federally subsidized loan without a sale or disposition of the home
does not result in recapture, but a later sale or disposition after
the refinancing may result in recapture.
You must file this form if all of the following apply (for
exceptions, see Special Rules below):
- 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.
- You received a Federal mortgage subsidy (see above).
Attach your Form 8828 to the Form 1040, U.S. Individual
Income Tax Return, for the tax year in which you sold or otherwise
disposed of your home. File it when the Form 1040 is due (including
extensions). If you have to file Form 8828, you must use
Form 1040.
Giving away your home.
If you gave away your home (other than to your 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.
Divorce.
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:
- It is incident to divorce, and
- No gain or loss was included in income.
See Pub. 504, Divorced or Separated Individuals, for
situations where gain or loss is included in your income on the
transfer incident to divorce.
Destruction by casualty.
If your home is destroyed by fire, storm, flood, or other casualty,
there generally is no recapture tax if you replace the home (for use
as your main home) on its original site within 2 years after the end
of the tax year when the destruction happened. If you don't replace
the home in time, you must file Form 8828 with Form 1040X,
Amended U.S. Individual Income Tax Return, for the year the home
was destroyed.
Two or more owners.
In general, if two or more persons own a home and are jointly
liable for the federally subsidized mortgage loan, figure the actual
recapture tax separately for each, based on the interest of each in
the home.
Qualified rehabilitation loan.
A qualified rehabilitation loan (QRL) is a loan funded by a QMB for
the rehabilitation of a home provided that:
- There were at least 20 years between the date of the
building's first use and the date rehabilitation began,
- A certain percentage of the walls and framework was retained
in place,
- The rehabilitation costs amounted to 25 percent or more of
your adjusted basis in the building after the rehabilitation,
and
- You were the first occupant of the home after the
rehabilitation was completed.
If you sold or disposed of this rehabilitated building that was
your home within 9 years after you received the QRL, you must
recapture the Federal mortgage subsidy. See section 143(k)(5) for
details.
Note:
There is no recapture of the Federal mortgage subsidy if instead of
a QRL you received a qualified home improvement loan (QHIL) funded by
a QMB. A QHIL is limited to $15,000 and is to be used for alterations,
repairs, and improvements that protect or improve the basic livability
or energy efficiency of your home. See section 143(k)(4) for details.
Qualifying subordinate mortgage loan (or grant).
A qualifying subordinate mortgage loan (or grant) (QSML) is a loan
that can be made in addition to any QMB or MCC federally subsidized
financing. To receive a QSML, you must agree that if you sell your
home within a 9-year period, you either sell according to
certain terms or share any gain with the QSML governmental
lender. See section 143(k)(10). If you had a QSML, see the line 13
instructions on page 2.
Refinancing your home.
Proceeds from a QMB cannot be used to refinance a home mortgage.
However, replacement of construction period, bridge, or similar
temporary financing used when you first purchased your home is not
treated as refinancing.
If, once you have received permanent financing from the proceeds of
a QMB, the home is refinanced (with conventional financing), the
Federal subsidy on your original QMB loan is subject to recapture when
you sell or dispose of your home within the 9-year recapture period.
If you refinance within the first 4 years after the closing date of
the original loan, you have to adjust your holding period percentage
(see the worksheet for line 20 on page 3) as if your loan was fully
repaid on the date of the refinancing.
An MCC can be reissued in a refinancing if all of the following
conditions are met.
- The issuer reissues an MCC to replace your existing MCC,
which can be the original MCC, an MCC issued to a transferee under
Regulations section 1.25-3(p), or an MCC previously reissued under the
refinancing provisions.
- The reissued MCC takes effect beginning with the date you
refinanced your home (refinancing closing date).
- The reissued MCC:
- Applies to the same property as your existing MCC,
- Replaces entirely your existing MCC,
- Specifies a mortgage debt that does not exceed the
outstanding debt balance on your existing MCC,
- Does not increase the certificate credit rate specified on
the existing MCC, and
- Does not increase the allowable credit under your existing
certificate for any tax year.
Repayment of the loan.
Your holding period percentage (line 20) may be reduced (see the
line 20 instructions) if you:
- Repay your loan in full or refinance other than with
reissuance of an MCC (as described earlier) within the first 4 years
after the closing date of your original loan, and
- Sell or dispose of your home later during the 9-year
recapture period.
Other special rules
may apply in certain cases. See section 143(m).
Note:
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. The notification
should state that your home was financed with a mortgage loan from the
proceeds of a tax-exempt bond or that you received a mortgage credit
certificate with your mortgage loan. The notification should include
information needed to figure your recapture tax and it should advise
you to keep it for your records.
Name(s) and social security number.
The name(s) and social security number on Form 8828 should be the
same as those shown on your Form 1040.
Part I—Description of Home Subject to
Federally Subsidized Debt
Line 1.
List the address of the property that was subject to the federally
subsidized debt, not your current address as shown on your Form 1040.
Line 2.
Check the applicable box on line 2 from the information on the
notification given to you at the time you took out the loan.
Line 3.
Fill in the requested information from the notification discussed
above. If you have a problem identifying the issuer, contact your
lender and ask for the information.
Line 4.
Fill in the name and address of the bank or other lender that
provided your original mortgage.
Line 5.
Fill in the month, day, and year that your original federally
subsidized mortgage loan was provided. This generally is the date of
settlement on your home. However, if the loan became federally
subsidized debt at a later date, use that date instead.
Line 6.
Fill in the applicable month, day, and year. Date of sale generally
is the date you settled on the sale of your home. However, Form 8828
also applies to certain other dispositions of your home. For instance,
the date to enter on line 6 may be the date you deeded the property to
a relative (see Giving away your home under Special
Rules on page 1).
Line 8.
Enter the date the original federally subsidized loan was fully
repaid. (This may be the same as the date of sale or other disposition
on line 6.) A refinanced QMB loan is fully repaid on the date of its
refinancing (with conventional financing). However, a refinanced MCC
loan that met all the conditions specified earlier under
Refinancing your home is considered an extension of the
original MCC loan. Do not enter the refinancing date for such an MCC
on line 8. See Refinancing your home and the instructions
for line 20.
Part II—Computation of Recapture Tax
Note:
You must report all required information for your interest in the
home. This may be less than 100% if someone else also has an interest
in the home (see Special Rules on page 1).
Line 9.
This item applies to both sales and other dispositions (see
Giving away your home under Special Rules on
page 1). If your home was disposed of other than by sale, the sales
price is the fair market value of the home at the time of the
disposition. You should only report the portion of the sales price
representing your interest in the home (see Two or more owners
and Qualifying subordinate mortgage loan (or grant)
under Special Rules on page 1).
Line 10.
Include sales commissions, advertising, legal fees, etc., allocable
to your interest in the home.
Line 12.
In general, the adjusted basis of your interest in the home is your
share of the cost of the property plus purchase commissions and
improvements, minus depreciation. Do not reduce the
adjusted basis for any gain that you did not recognize on the sale of
a previous home.
If you received your home, or interest in a home, incident to a
divorce, your adjusted basis is generally the same as that of your
spouse (or former spouse).
For details on how to determine your adjusted basis, get Pub.
551, Basis of Assets.
Line 13.
Enter “ QSML” on the dotted line to the left of the line 13
entry space if you sold your home at a gain within the 9-year
recapture period and paid a share of that gain to the QSML
governmental lender. In the amount column for line 13, enter your
share of the gain. Attach a worksheet to your Form 8828 to explain how
you calculated your share of the gain. Show the date you paid the QSML
governmental lender its share of the gain and the amount of that
share. See Qualifying subordinate mortgage loan (or grant)
on page 1.
Line 15.
Figure your modified adjusted gross income as follows:
- Begin with: Your adjusted gross income as shown
on your Form 1040.
- Add: Any tax-exempt interest that you received or
accrued for the tax year.
- Subtract: Any gain included in your gross income
because of the disposition of your home.
Line 16.
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. The notification
contains a table which lists adjusted qualifying income figures. Your
adjusted qualifying income is found in the column of the table that
corresponds to your family size (number of family members living with
you at the time of the sale) on the line that corresponds to the
number of full and partial years that you held your home.
Line 19.
The federally subsidized amount should be found on the notification
you received from the bond issuer or from your lender. It is equal to
6.25% of the highest amount of the loan that was federally subsidized.
Enter the figure on line 19.
Line 20.
You will find your holding period percentage on the same line of
the table from which you obtained your adjusted qualifying income (see
line 16 instructions). However, if you fully repaid the federally
subsidized loan within 4 years of the closing date of the loan, and
before selling or otherwise disposing of your home, you will need to
use the worksheet on page 3 to redetermine your holding period
percentage for line 20.
Worksheet for figuring the holding period percentage
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