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Tax Credits for Individuals

  1. Child Tax Credit
  2. EITC
  3. Form 5405
  4. Foreign Tax Credit
  5. IRS Publication 970
  6. Publication 972
  7. Form 1095-A
  8. ACTC
  9. Bush Tax Cuts
  10. Hope Credit
  11. Non-Refundable Tax Credit
  12. Tax Credit

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Form 5405: Repayment of the First-Time Homebuyer Credit

Updated: February 20, 2023

If you purchased a home between April 8, 2008, and December 31, 2008, a first-time homebuyer credit was available from the IRS. Form 5405 is used for the repayment of the first-time homebuyer credit that was received for a home bought in 2008. There were other first-time home buyer credits in other years that didn’t have to be repaid to the IRS. In this article, we explain some key points about this specific first-time homebuyer tax credit and how the 5405 form works.

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    KEY TAKEAWAYS

    • The First-Time Homebuyer Credit is a refundable tax credit for eligible taxpayers who purchase a home. You may be able to claim the credit if you’re an eligible taxpayer and meet all the requirements.
    • One requirement is that you must have bought your home in or before 2010.
    • If you sell your home, you may have to repay some or all of the credit.
    • To repay the credit, you must attach Form 5405 to your federal income tax return.

    What is Form 5405?

    Form 5405 is the form you have to fill out to notify the IRS if you sold your main home that you purchased in 2008, or to calculate the amount of the credit that needs to be paid bak in 2022.

    You must attach Tax Form 5405 to your income tax return.

    Form 5405 is the form you have to fill out to notify the IRS if you sold the main home that you purchased in 2008, or to calculate the amount of the credit that needs to be paid back in 2022.You must attach Tax Form 5405 to your income tax return.

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    What Is The Purpose Of Form 5405?

    Tax Form 5405 is a form to calculate the amount of the first-time homebuyer credit that needs to be repaid. The form is used for the credit received if you bought a home in 2008.

    The maximum credit is $7,500. You qualified for the full amount of the credit if your house cost $75,000 or more. The credit applied to homes purchased between April 8, 2008, and December 31, 2008. There were other versions of this credit in the following years, which usually didn’t require repayment.

    Who Should File Form 5405?

    The first-time home buyer credit was only available to people who are buying a home for the first time and have not owned a home in the previous three years.

    Homeowners who got the credit must’ve planned to occupy the home as their primary residence. You could also get disqualified if you filed as a non-resident alien, were in bankruptcy, or if you had an outstanding federal tax liability.

    What Are The Exceptions To Form 5405?

    There are a few exceptions to filing Form 5405. You don’t have to repay the credit if:

    • You sell your main home for less than the purchase price.
    • The home is destroyed or condemned, and you don’t replace it within two years.
    • You’re divorced and your ex takes ownership of the home (even if they’re not the original buyer).
    • You’re making credit installment payments on a home bought before 2008.
    • You die, and your estate doesn’t have to repay the credit.
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    When to File Form 5405

    You have to meet several criteria to qualify for the first-time home buyer credit. You must be a U.S. citizen or resident alien, have purchased a home, and have not owned a home in the past three years. Additionally, you qualified for the full credit if your home cost at least $75,000. You must plan to use it as your primary residence.

    How To File Form 5405

    To claim the first-time home buyer credit, you’ll have to file Form 5405. You can do this when you file your personal income tax return. You can see how much of the credit you are eligible for on Form 5405.

    You cannot claim the credit on either a 1040 or 1040A tax return. You must file Form 5405 if you’re claiming the first-time home buyer credit. If you’re married, your spouse must also file Form 5405 if they are also claiming the credit.

    The 15 annual credit repayments are usually divided into $500 installments.

    Example Of Form 5405

    Here’s an example of what Form 5405 looks like:

    Form 5405: Repayment of First-Time Homebuyer Credit

    Below are just some of the items you’ll need to provide.

    1. Enter the date you disposed of your home.
    2. Whether you gained money on the sale.
    3. Enter how much credit you claimed.
    4. Provide sales price.
    5. Any selling expenses.
    6. Subtract selling expenses from the selling price.

    Summary

    Form 5405 is for repaying the First-Time Homebuyer Credit. You must file Form 5405 if you sell your home, gain money from the sale, and meet certain other conditions. The credit is equal to the lesser of the credit amount or the gain on the sale of your home. You generally must repay the credit in equal annual installments over 15 years.

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    Sandra Habinger headshot

    Written by Sandra Habiger

    Sandra Habiger is a Certified Public Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Learn more about her work at https://www.sixfiguresaccounting.com/ .

    Sandra Habinger headshot

    Written by Sandra Habiger

    Sandra Habiger is a Certified Public Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Learn more about her work at https://www.sixfiguresaccounting.com/ .

    FAQs on Form 5405

    Do I need to file Form 5405?

    You need to file a form 5405 if you’re repaying the First-Time Homebuyer Credit. You must attach the form to your personal income tax return.

    Where can I find form 5405?

    You can find form 5405 on the IRS website.

    What is the IRS first-time homebuyer credit?

    The First-Time Homebuyer Credit was a tax credit for eligible taxpayers who purchase a primary residence between April 8, 2008, and May 1, 2010. There were different variations of the credit depending on when the home was purchased.

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