Recapture tax

[pedsaktix]

Can someone explain this "recapture tax" for dummies..   I have just gotten pre-approved for a VHDA loan and somehow came across to this additional tax obligation..

From what I can understand is.. If your household income increases significantly and you sold your house within 9 years, you will be owing the feds 15% capital gains and this recapture tax of additional 5%..    But what is significant?  10%, 20%, 50% increase?

[foofighter74]

Basically, there is a federal income threshold limit that increases 5% each year you have your mortgage for 9 years. If you regularly receive large raises and your income is already near the threshold limit when you buy, it's something you have to worry about.  But it's all based on what the federal threshold is in your area.