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Category: Credits

How do I repay the First-time Homebuyers Credit?

Please use this article as a guideline to complete Form 5405, page 2 correctly. Incorrect filed forms may result in an IRS Reject Code.

To access the menu to repay your First-time Homebuyer Credit, go into the Federal Section >> Other Taxes >> First-time Homebuyer Repayment (Form 5405). Fill out all applicable information regarding your specific type of repayment.

TO MAKE AN INSTALLMENT PAYMENT

If you purchased your home after April 8, 2008 and before January 1, 2009 and you received the 2008 First-Time Homebuyer credit of $7,500, your first installment is due on your 2010 tax return.

To report this installment payment, you will enter the total amount you received as a credit in the Repayment of Credit section and check the first box stating that you are making an installment payment. Select "Continue" to save your information and we will automatically calculate the amount of the repayment for you.

TO REPORT A DISPOSITION OR CHANGE IN USE OF THE MAIN HOME FOR WHICH THE CREDIT WAS CLAIMED

If you received the First-time Homebuyers Credit, and in 2010, you Disposed, Sold or Changed the Use of the Main Home for which the credit was claimed before 36 months from the date of purchase, you may have to repay some or all of the credit on your 2010 tax return as well as future tax returns. There are several scenarios that exist to report the disposition and they are explained below.

Members of the Uniformed Services, Foreign Service, Employee of the Intelligence community

If you sold or changed the use of your main home due to orders for qualified official extended duty service, you are not required to repay the credit that you received. Please enter the "Date Ceased to be Main Home" and check the box that states:

"I (or my spouse if married) am, or was, a member of the uniformed services or Foreign Service, or an employee of the intelligence community. I sold the home, or it ceased to be my main home, in connection with Government orders for qualified official extended duty service."

DO NOT complete the section for Repayment of Credit section or select any other repayment type. It may be necessary to Delete the form and re-enter it with only the required information.

NOTE: If you sold or changed the use of the home after 12/31/2010, you are responsible for the installment payments. You will need to remove the date sold, uncheck the box and complete the repayment section of the form.

Sold the home to an unrelated person with NO gain

If you sold or otherwise disposed of the home and did not receive a gain on the sale, you are not required to repay the credit. Please enter the "Date Ceased to be Main Home" and check the selection that states:

"I sold (including through foreclosure) the home to a person who is not related to me and did not have a gain on the sale."

Do not complete the section for Repayment of Credit section. If you have information entered there, please remove the information.

The home was transferred to spouse or ex-spouse

If you transferred the ownership of your home to your spouse or ex-spouse and are not filing a joint return with the said spouse or ex-spouse, you are not required to repay the credit. Please enter the "Date Ceased to be Main Home" and check the selection that states:

"I transferred the home to my spouse (or ex-spouse as part of my divorce settlement)."

Please enter the name of the spouse or ex-spouse in the space provided. Do not complete the section for Repayment of Credit section. If you have information entered there, please remove the information.

The Taxpayer who received the credit died

If the taxpayer who received the credit died, and they are not filing a joint tax return, he/she is not required to repay the credit. Please enter the date of death as the "Date Ceased to be Main Home" and check the selection that states:

"The taxpayer who claimed the credit died ."

If this is a joint return, do not make this selection and select the option that fits the surviving spouse based on whether or not the spouse remains in the home or has sold or otherwise disposed of the home.

Sold the home for a GAIN

If you sold the home to an unrelated person and received a gain on the sale, you must repay the credit up to the amount of the gain on the sale. Complete the Repayment of Credit section of the form by entering the amount of the credit received and select:

"I am reporting a disposition or change in use of my main home."

Enter the amount of GAIN in the box provided and proceed to the Disposition section. Enter the "Date Ceased to be Main Home" and select:

"I sold (including through foreclosure) the home to a person who is not related to me and had a gain on the sale."

Sold the home to a related person

If you sold the home to a related person, you must repay the credit. Complete the Repayment of Credit section of the form by entering the amount of the credit received and select:

"I am reporting a disposition or change in use of my main home."

Enter the "Date Ceased to be Main Home" and select:

"I sold the home to a related person."

Converted home to Rental or Business Use or still own home but it has Ceased to be my Main Home

If you converted your home to a Rental or Business Use home or you still own the home but it has ceased to be your Main Home, you must repay the credit. Complete the Repayment of Credit section of the form by entering the amount of the credit received and select:

"I am reporting a disposition or change in use of my main home."

Enter the "Date Ceased to be Main Home" and select:

"I converted the entire home to a rental or business use OR I still own the home, but no longer use it as my main home."

Home was Destroyed, Condemned, or Disposed of Under Threat of Condemnation

If you sold your home through condemnation or under the threat of condemnation to a person who is not related to you and you DID NOT acquire a new home within the 2-year replacement period, the amount of the credit you have to repay is limited to the gain on the sale.

"I am reporting a disposition or change in use of my main home."

Enter the amount of GAIN in the box provided and proceed to the Disposition section. Enter the "Date Ceased to be Main Home" and select:

"I sold (including through foreclosure) the home to a person who is not related to me and had a gain on the sale."

If you did not have a GAIN on the sale follow the instructions above for "Sold the home to an unrelated person with NO gain".

If you sold your home through condemnation or under the threat of condemnation to a person who is not related to you and you DID acquire a new home within the 2-year replacement period, you will continue to make the installment payment as required for the first home. Follow the instructions for "TO MAKE AND INSTALLMENT PAYMENT" above.