Recapture Tax Law and Legal Definition

Recapture Tax means the tax charged to the home owner during certain specific situations to get back the costs. For instance, some government sponsored or insured programs, like HUD Low Income Housing programs, require that the buyer occupy the property and retain ownership for a specific period of time. If the buyer sells the property and in some cases moves out of the property, the tax benefits or subsidies received are recaptured or charged to the homeowner. In such a case, a recapture tax serves as a penalty assessed for selling the house too early.