Since WCDA Mortgage Loans are financed with proceeds of tax-exempt qualified mortgage bonds, you may be subject to a special "recapture tax" for federal income tax purposes which would be imposed at the time you sell the residence financed by the Mortgage Loan.

This potential tax, which is not imposed until you sell your residence, is based upon the concept that interest on the Wyoming Community Development Authority's bonds is tax-exempt, and by receiving a WCDA loan the federal government has enabled you to take advantage of this tax exemption through a lower interest rate on your mortgage loan.

But this Recapture tax will only apply if you:

1. Sell your home within nine years of your closing date (homes sold after the nine-year period are not subject to recapture tax); and
2. Have a gain on the sale of your home; and
3. Have a modified adjusted gross income over the adjusted qualifying income on your recapture notice for the year you sell your home (based on your family size at the time of sale of the residence).
   

Even if recapture applies, you may not have to pay the maximum Recapture Tax because there are numerous factors taken into account in computing the amount of tax imposed at the time you sell the residence. These factors include the original principal amount of the mortgage, the number of years that pass before you sell the residence, the median family income for your area at the time of acquisition of the residence and your adjusted gross income at the time of sale of the residence.

If Recapture applies, the maximum Recapture Tax will never exceed 6.25% of the original principal balance of your mortgage, or 50% of the net gain from the sale of your home if that is less. The maximum Recapture Tax only applies if you sell your home during the 5th year. The amount of the Tax starts at 20% of the Tax the first year and increases by 20% for the first five years that you own the residence, and reduces by 20% each year thereafter. No tax is imposed if you continue to hold your residence for more than nine years.