Recapture Tax

Many benefits are provided to first time homebuyer and who apply for FHA financing for buying a home. These benefits include loans on low interest rates and also funds for down payment assistance. These programs are governed by Federal laws. There is "recapture" tax to pay if the borrower meets the following conditions:

• Borrower sells the property within nine years of ownership.
  
• There is a net profit on the sale of the property.
  
• There is a increase (5% per year) in the income of the borrower.
  

But, the borrower don't have to pay the recapture tax if,

• the property is sold after nine years of ownership.
• there is no profit by selling the property.
  
• no increase in the salary of the borrower.
  
• the house is destroyed by any natural calamity.
  
• transfer of property to the spouse or ex-spouse as an agreement of divorce.