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Category: Federal

Repayment of First-Time Homebuyer Credit (Form 5405)

Form 5405 Repayment of First-Time Homebuyer Credit

 

Homeowners who purchased their home in 2008 and received the First-time Homebuyer’s credit of $7,500 on a 15 year repayment plan, are in year 5. Please remember to complete form 5405 with to add the repayment to your tax return.

 

Homeowners who purchased their home after 2008 and you owned it and used it as your main home for at least 36 months beginning on the purchase date, you do not have to repay any of the credit or file Form 5405.

 

Who must complete Form 5405 Repayment of First-Time Homebuyer Credit?

 

You must file Form 5405 if you meet either of the following conditions:

 

You disposed of your home or you ceased using the home as your main home in 2013. (Note. This condition does not apply if you purchased the home after 2008 and you owned and used it as your main home for at least 36 months beginning on the purchase date.)

 

OR

 

You are repaying the credit because you purchased your home after 2008, the home was destroyed or you sold it through condemnation or under threat of condemnation in 2011, and you did not purchase a new home within 2 years of the event.

 

How much do I owe and what is my repayment amount?

 

Use the IRS First Time Homebuyer Credit Account Look-up to get account information such as the total amount of your credit or your repayment amount.

 

Click Here to visit the First-Time homebuyer Credit Account Look-up tool.

 

 

Repaying the Credit

 

You generally must repay the credit if, after the year for which you claimed the credit, you dispose of the home or it ceases to be your main home during the 36-month period beginning on the purchase date. This includes situations where you sell the home (including through foreclosure), you convert the entire home to business or rental use, the home is destroyed or condemned, or you dispose of the home under threat of condemnation.

 

When you convert your entire home to business or rental use, you no longer use any part of it as your main home. The home is used for business if you use it for an activity that you carry on to make a profit. The facts and circumstances of each case determine whether or not an activity is a business.

 

If you and your spouse claimed the credit on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit.

 

 

  1. The following are exceptions to the repayment rule according to the IRS

 

  • If you sell the home to someone who is not related to you,
  • If the home is destroyed or you sell the home through condemnation or under threat of condemnation, you do not have to repay the credit if you purchase a new main home within 2 years of the event and you own and use it as your main home during the remainder of the 36-month period.
  • If the home is transferred to a spouse (or ex-spouse as part of a divorce settlement), the spouse who receives the home is responsible for repaying the credit if, during the 36-month period beginning on the purchase date, he or she disposes of the home or it ceases to be his or her main home and none of the other exceptions apply.

 

Special Benefits for Members of the Military

 

In many cases, the First Time Homebuyer Repayment (or recapture) requirement is waived for members of the Uniformed Services, members of the Foreign Service and employees of the Intelligence Community.

 

This particular relief applies where a home is sold or stops being the taxpayer's principal residence after December 31, 2008, in connection with government orders received by the taxpayer (or the taxpayer's spouse) for qualified official extended duty service. The credit is still allowable even if this happens during the year of purchase. Qualified official extended duty, according to the IRS, is any period of extended duty while serving at a place of duty at least fifty (50) miles away from the taxpayer's principal residence (whether inside or outside the United States) or while residing under government orders in government quarters. This is further defined as any period of duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.

 

How to complete Form 5405 in the Taxslayer Program

 

If any of these situations apply to you and you must create the Form 5405 you may do so in the Taxslayer account. Once logged in select Federal Section>>Other Taxes>>First-Time Homebuyer Repayment (Form 5405). If you need to complete the Repayment of Credit portion of the form please ensure you only enter ½ of the credit amount and amount already repaid. The Taxpayer and Spouse will each need to include a Form 5405 and each should report half the amount of credit.