Recapture tax applies to one Louisiana programme, not four

Program and regulatory figures verified October 5, 2026. Details change; confirm your scenario with us.

By Mike Certo, Cornerstone First Mortgage · NMLS #260555 · Updated October 5, 2026

Recapture tax worries more Louisiana buyers than it ever costs them. It attaches to one programme, needs several things to be true at once, and expires well before most people move.

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What it is and where it attaches

A federal clawback of part of the subsidy a borrower receives from a tax-exempt mortgage revenue bond loan. It is owed to the IRS rather than to LHC, and it travels with the bond funding.

The Lenders' Guide attaches it to HomeStart Assist in one sentence: "The first mortgage is financed with tax-exempt mortgage revenue bond funds and may be subject to federal recapture tax if the home is sold within nine years of closing and the applicable income and gain conditions are met."

We are stating what LHC publishes rather than asserting a clean "no" on the other three. If recapture is central to your decision, ask your lender to confirm the position for the specific programme in writing.

What has to be true before anything is owed

LHC's sentence contains three conditions, and the word doing the most work is "and":

1. The home is sold within nine years of closing.
2. The applicable income condition is met.
3. The applicable gain condition is met.

Miss any one and no recapture tax is due. Sell in year ten and the question disappears entirely; sell at a loss and the gain condition fails; keep your income within the applicable threshold and the income condition fails.

That last one does more work than people expect. Recapture is designed to recover subsidy from borrowers whose circumstances improved substantially — a household that qualified on income at purchase frequently still qualifies at sale.

★ It is not the same thing as repaying the assistance

This is the distinction that causes most of the confusion, so it is worth setting out side by side.

So on HomeStart Assist there are two clocks running, and they are different lengths. The assistance is gone at five years. The recapture window stays open for nine. How forgiveness works.

What LHC gives you

LHC publishes a combined Notices to Buyers and Recapture Tax document through eHousing Plus, linked from the HomeStart Assist and HomeStart Plus programme pages. If recapture matters to your situation, ask your lender to provide it rather than relying on a summary — including ours.

The federal mechanics are handled on IRS Form 8828, and the calculation happens at sale rather than at closing.

How much should this change your decision?

Less than its reputation suggests, with one qualification worth taking seriously.

In its favour: the conditions are cumulative, the window closes at nine years, and plenty of bond-programme borrowers never owe anything. Against a below-market first mortgage held for the long term, it is a tail risk.

The qualification: Louisiana is not a uniformly rising market. 5 of its 17 metros were down year over year in August 2026 — DeRidder off 4.8%, Natchez 3.7%, Houma 2.7%. A flat or falling market makes recapture less likely, because the gain condition is harder to meet, while making an early sale painful for ordinary reasons. The two effects point in opposite directions and the second one matters more.

Mike's read: if you expect to stay, take HomeStart Assist and treat recapture as remote. If you already know you may move inside five or six years, the question to weigh is not recapture — it is whether you will still be there at month 60 when the 4% is forgiven. HomeStart Advantage pays the same 4% on the same 60-month clock, without the bond financing underneath it.

We are lenders. Whether recapture is actually owed on your sale is a question for your CPA.

Frequently asked questions

Does Louisiana down payment assistance have a recapture tax?

HomeStart Assist does, because its first mortgage is financed with tax-exempt mortgage revenue bond funds. LHC states it may be subject to federal recapture tax if the home is sold within nine years of closing and the applicable income and gain conditions are met.

Is recapture tax the same as repaying LHC assistance?

No. The forgivable second mortgage is owed to LHC and clears at 60 months if occupancy is maintained. Recapture tax is owed to the IRS, has a nine-year window, and depends on sale timing, income and gain. On HomeStart Assist both clocks run, and they are different lengths.

How long does Louisiana recapture tax last?

Nine years from closing. A sale after that point falls outside the window entirely. Within it, recapture is only owed if the applicable income and gain conditions are also met.

Where can I read LHC's recapture tax explanation?

LHC publishes a Notices to Buyers and Recapture Tax document through eHousing Plus, linked from the HomeStart Assist and HomeStart Plus programme pages. The federal mechanics are handled on IRS Form 8828, and the calculation is made at sale rather than at closing.

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Mike Certo · NMLS #260555 · Cornerstone First Mortgage NMLS #173855 · Equal Housing Lender. Educational content about financing, not a loan commitment and not legal or tax advice. Louisiana Housing Corporation programme terms, income limits and purchase price limits are set by LHC and change; figures here carry the date we verified them against LHC's published documents. LHC assistance is a zero-interest forgivable second mortgage, forgiven only if occupancy and programme requirements are maintained. Federal recapture tax may apply on HomeStart Assist bond loans; consult a tax advisor. Loans are subject to borrower and property qualification.