Form 5405: Repayment of the First-Time Homebuyer Credit

Form 5405 is an Internal Revenue Service (IRS) document used specifically for repaying the First-Time Homebuyer Credit. This credit, introduced in 2008, is no longer available for new home purchases. However, if you claimed the credit between April 9, 2008, and September 30, 2010, you may need to use Form 5405 to report certain situations.

What is the Purpose of Form 5405?

A. Report Disposition or Change in Use: The primary purpose of Form 5405 is to notify the IRS that the home you purchased in 2008, for which you claimed the credit, is no longer your primary residence. This could be due to selling the house, converting it to a rental property, or other situations where it ceases to be your main home.

B. Calculate Repayment Amount: If you must repay the credit, Form 5405 helps you determine the amount owed to the IRS. This repayment amount is typically a portion of the original credit claimed.

Who Needs to Use Form 5405?

You generally need to use Form 5405 if you claimed the First-Time Homebuyer Credit in 2008 and one of the following applies:

  • You sold the home before living there for at least 36 months.
  • The home was destroyed, condemned, or you were forced to sell it under threat of condemnation within 36 months of purchase.
  • You converted the property to a rental property or used it for business purposes before the 36-month residency requirement was met.

Important Note: If you have continuously lived in the home you purchased in 2008 for at least 36 months as your primary residence, you do not need to repay the credit and you do not need to file Form 5405.

What happens if I don't file Form 5405?

Failing to file Form 5405 when required can result in penalties and interest charges from the IRS.

How much of the credit do I need to repay?

The amount you repay depends on several factors, including the original credit amount, the sale price of the home (if applicable), and how long you lived in the property. Form 5405 includes a worksheet to help you calculate the repayment amount.

Where do I report the repayment amount on my tax return?

Once you have determined the repayment amount using Form 5405, you will report it as additional tax on your tax return for the year the home ceased to be your primary residence. The specific line number may vary depending on the tax form you file (e.g., Schedule 2 for Form 1040).

When do I need to file Form 5405?

File Form 5405 with your regular tax return for the year your home ceased to be your primary residence, if repayment is required.