What's the deal with IRS Form 8828 - Recapture of Federal Mortgage Subsidy for FHA loan?

Yes, Form 8828 is absolutely real and the recapture tax is definitely enforced. This is part of the agreement when you get the benefit of an FHA loan. When you closed on your original home purchase, you would have signed documents acknowledging this potential recapture. The reason you haven't heard anything about it is because it's YOUR responsibility to report it - the IRS doesn't automatically know you sold the house before the 9-year period was up. Your lender won't notify you because they don't track this information for tax purposes. The 9-year rule exists because the government subsidized your mortgage rate, and if you sell within that period and make money (and your income increased), they want some of that subsidy back. The form isn't that complicated to fill out - you'll need your original mortgage documents that show the "federally-subsidized amount" and follow the worksheet calculations. Since you're in the 8-9 year range, you'll only pay 20% of the original recapture amount, which is much better than if you'd sold in years 1-5.

I went through this exact nightmare last year! After selling my starter home that I bought with an FHA loan, I was hit with this surprise "mortgage subsidy recapture" thing. I was totally confused because nobody mentioned it during closing. I ended up using https://taxr.ai to figure it out. They have this document analysis tool where you upload your original mortgage papers and sales documents, and it tells you exactly what to put on Form 8828. It saved me hours of confusion and probably mistakes. The tool confirmed I did owe about $1,800 (ugh), but at least I had confidence I was calculating it correctly. It also showed me which income thresholds matter - in my case, our household income had increased enough over the years that we definitely triggered the recapture.

I was SUPER skeptical about using any online service for something like this, but after spending hours on the phone with the IRS getting nowhere, I broke down and tried taxr.ai. It actually turned out to be really helpful for my Form 8828 situation. The site analyzed my closing documents from both the purchase and sale, and explained exactly how the recapture calculation worked. My situation was complicated because I had refinanced during the 9-year period, but the tool still walked me through it. The best part was that it found I actually qualified for an exception! My income hadn't increased enough compared to the area median income, which meant I didn't owe the recapture tax after all. Saved me about $2,300! I would've just paid it if I hadn't checked.

I had a similar situation with Form 8828 last year and tried for WEEKS to get someone at the IRS to explain it to me. Couldn't get through no matter what time of day I called. Finally, I used https://claimyr.com to get through to the IRS. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an agent picks up. Within a day, I was talking to someone who could actually help with my recapture tax questions. The IRS agent confirmed I needed to file the form, but also explained that there are income exemptions that might apply. Turns out my income increase wasn't enough above the area median income to trigger the full recapture amount. Ended up saving about $1,200 compared to what I thought I owed.

I take back everything I said about Claimyr. After my comment yesterday, I was still struggling to get answers about my Form 8828 situation and decided to give it a shot. I signed up for Claimyr in the afternoon, and by the next morning got a call connecting me to an actual IRS representative. The agent walked me through exactly how to calculate the recapture amount and confirmed I qualified for a partial exemption based on my income. Turns out I only owed about 40% of what I initially calculated because my income hadn't risen enough relative to the county median income during the ownership period. The IRS agent even emailed me the worksheet I needed. Saved me over $1000 and a ton of stress!

Just wanted to add another perspective - I went through this Form 8828 situation a few years back. While yes, technically you're supposed to file it, in my experience the IRS has bigger fish to fry. I know several people who sold their FHA-financed homes within the 9-year period and never filed the form or paid the recapture. None of them have heard anything from the IRS about it. That said, I did file mine because I didn't want it hanging over my head. One thing to check - look at your income compared to the area median income when you bought the place. If your income hasn't increased by more than 5% per year over the area median income, you might not owe anything at all. This exemption saves a lot of people from the recapture tax.

So I'm a mortgage underwriter and see this question occasionally. The mortgage subsidy recapture is definitely real, but there are several exemptions most people don't know about: 1) If you sell your home at a loss, no recapture tax is due 2) If your income doesn't exceed the qualifying income by more than 5% compounded annually, no recapture tax is due 3) If you refinanced into a conventional loan during the 9-year period, the rules get complicated (sometimes it still applies, sometimes not) For the original poster - yes, file the form. The amount owed decreases each year you own the home, and at 8 years 9 months, you're only paying 20% of the max recapture amount. The IRS doesn't typically hunt people down for this specific issue, but if you get audited for any reason, they will definitely catch it.

I'm dealing with this exact same situation right now! Bought my first home with an FHA loan in 2016 and just sold it last month after 7 years and 8 months. Found that same paperwork buried in my files and had a mini panic attack. After reading through all these responses, I'm definitely going to file Form 8828. The income exemption might save me though - my salary has gone up but I don't think it's increased by more than 5% annually compared to the area median income. One thing I learned from my closing documents is that the original "federally subsidized amount" was clearly stated in the disclosure I signed at purchase. It was buried on page 47 of my loan docs but it's there. If anyone else is looking for this number, check your HUD-1 settlement statement or the mortgage subsidy disclosure form you would have signed. Thanks everyone for the helpful info - this community is a lifesaver for navigating these obscure tax situations!