What is Form 5405?
Form 5405, Repayment of the First-Time Homebuyer Credit, is an IRS Form used by homeowners to claim a tax credit for the purchase of a new home between April 9, 2008, and September 30, 2010. However, the said tax credit has become defunct. Form 5405 IRS was revised, and it is now used mainly by taxpayers to repay their credits.
5405 Form is used to notify the IRS that the home you purchased in 2008 and for which you claimed the credit ceased to be your main home or you disposed of it. However, not everyone is required to fill out this form. Here are some situations where you may be exempted from the repayment rule:
- If the home is destroyed, or the home was sold through condemnation or under threat of condemnation;
- If the home is transferred to a spouse or ex-spouse; or
- If the person who claims the credit passed away.
You may download a PDF copy of IRS 5405 Form on the IRS website. But you may electronically fill it out on PDFRun for your convenience.
How to fill out Form 5405?
Provide the necessary information in Form 5405 IRS. Make sure to read everything before you fill all the required fields.
Name shown on return
Enter your full legal name shown on your tax return.
Your Social Security Number
Enter your social security number.
Part I - Disposition or Change in Use of Main Home for Which the Credit Was Claimed
Part I requires you to fill out information if you claimed the first-time homebuyer credit for a home you purchased in 2008, and said home was either disposed of or ceased to be your main home in 2021.
Enter the date you disposed of, or ceased using as your main home, the home for which you claimed the credit. Enter it in MM/DD/YYYY.
Check the box to determine if you met all the following conditions:
- You (or your spouse if married) are or were a member of the uniformed services or Foreign Service, or an employee of the intelligence community.
- You also sold the home, or it ceased to be your main home, in connection with US Government orders for qualified official extended duty service.
If you checked this box, you don’t need to repay the credit and you may stop here. Otherwise, leave the box blank.
Check the appropriate box to determine what applies to you. You may select:
- A - I sold (including through foreclosure) the home to a person who isn't related to me and had a gain on the sale.
- B - I sold (including through foreclosure) the home to a person who isn't related to me and didn’t gain on the sale.
- C - I sold the home to a related person OR I gave the home to someone other than my spouse (or ex-spouse as part of my divorce settlement.)
- D - 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.
- E - I transferred the home to my spouse (or ex-spouse as part of my divorce settlement.) The full name of my ex-spouse is:
- F - My home was destroyed, condemned, or sold under threat of condemnation and I had a gain.
- G - My home was destroyed, condemned, or sold under threat of condemnation and I didn’t have a gain.
- H - The taxpayer who claimed the credit died in 2021.
If you checked Option A, C, and D, go to Part II below. If you checked Option B, you don’t have to repay credit and you may stop here. If you checked Option E, enter the full name of your ex-spouse.
If you checked Option H, the deceased taxpayer does not need to repay the credit. See the instructions of Form 5405 if you are filing a joint return for 2021 with the deceased taxpayer. Otherwise, you may stop here.
Part II - Repayment of the Credit
If you checked Options A, C, and D, you’re required to answer this part.
Enter the amount of the credit you claimed on Form 5405 for 2008. If you filed a joint return for 2008 or checked Option F and G of Item 3, see the instructions of Form 5405.
Enter the amount of the credit you repaid with your tax returns for the years 2010 through 2020.
Subtract the amount on Item 5 from Item 4, and enter the result.
If you checked Option F and G of Item 3, see the instructions of Form 5405. If you checked Option A of Item 3, go to Item 7. Otherwise, skip Item 7 and go to Item 8.
Enter the gain on the disposition of your main home.
Enter the amount of the credit to be repaid.
Enter the amount from Line 8 of your 2021 Schedule 2 of Form 1040, US Individual Income Tax Return, Line 10.
Part III - Form 5405 Gain or (Loss) Worksheet
This section determines the amount of credit you need to repay.
Enter the selling price of your home, insurance proceeds, or gross condemnation award.
Enter the selling expense or expenses in getting the condemnation award. Selling expenses include commissions, advertising and legal fees, and seller-paid loans.
Enter the amount realized on the sale of the home by subtracting Item 10 from Item 9.
Enter the adjusted basis of your home sold.
Enter the first-time homebuyer credit claimed on Form 5405 minus the amount of the credit you repaid with your tax returns for the years 2010 through 2020.
Enter the adjusted basis for repaying the credit by subtracting Item 13 from Item 12.
Subtract Item 14 from Item 11.
If Item 15 is more than 0, this means you have a gain. Check Option A of Item 3 and complete Part II. However, check Option F of Item 3 instead if your home was destroyed or you sold your home through condemnation or under threat of condemnation. Complete Part II only if the event happened in 2019.
If Item 15 is 0 or less, check Option B of Item 3. But if your home was destroyed or you sold the home through condemnation or under threat of condemnation, check Option G of Item 3 and you don’t have to repay the credit.
How to file Form 5405?
File IRS Form 5405 along with your 2021 Tax Return and submit it to your nearest IRS Center. Take note that you need to file this form if you bought a home in 2008 and you met the following conditions:
- You disposed of it; and
- It ceased to be your main home in 2021.