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What Is Form 5405: First-Time Homebuyer Credit and Repayment of the Credit?
Form 5405 is a tax form from the Internal Revenue Service (IRS) that taxpayers once used to claim a credit for part of a new home's purchase price. You can't claim this credit anymore, but if you bought a home before 2010 and closed by September 30, 2010, you might still be able to use it for related purposes.
Key Takeaways
Let me outline the essentials: Form 5405 comes from the IRS and was for claiming a tax credit on new or replacement homes bought between April 9, 2008, and September 30, 2010—that credit is defunct now. It provided 10% of the purchase price, capped at $6,500 to $8,000. The form got revised in 2021, and today it's mostly for those repaying the credit.
Understanding Form 5405: First-Time Homebuyer Credit and Repayment of the Credit
The federal first-time homebuyer tax credit started under the Obama administration in 2008 and ran for about two years and five months, ending on September 30, 2010. In 2008, you could claim 10% of the home's price up to $7,500, which increased to $8,000 in 2009. For homes costing $75,000 to $80,000, you'd get the full amount, but it was always the lesser of the percentage or the fixed cap.
Generally, if you sold the home within 36 months or it stopped being your main residence, you had to repay the full credit. For 2008 buyers, think of it as a $7,500 interest-free loan—you repay it in 15 equal parts over 15 years.
Who Can File Form 5405: First-Time Homebuyer Credit and Repayment of the Credit?
Individuals and married couples qualified for this credit. Initially, it was just for first-time buyers—meaning you hadn't owned a home in the three years before purchasing. Later, it expanded to longtime residents buying a new primary home as a replacement, with a max of $6,500, and usually no repayment required.
There were limits on the home's purchase price and your modified adjusted gross income (MAGI), but no minimum income, so it could even give you a refund if you owed no taxes. You'd attach Form 5405 to your tax return with the settlement statement, like HUD-1, showing names, signatures, address, date, and price. For things like mobile homes, other contracts could work to prove eligibility.
If you bought a qualified home in 2009 but didn't claim the credit, you should file an amended 1040-X with Form 5405 to get it. Note that in 2021, President Biden proposed a new $15,000 credit, but the bill stalled in the House as of September 2022.
Example of Form 5405
You can find details and download Form 5405 from the IRS website. It includes sections for your info, the credit calculation, and any repayment details.
Form 5405 Revision
The form was updated in November 2021 to handle repayments of the first-time homebuyer credit. Use it to tell the IRS if you sold or stopped using your 2008-purchased home as your main residence in 2021—complete Part I, and Parts II and III if needed. It also calculates how much credit you must repay with your 2021 return.
Conditions for Filing the Revised Form 5405
- The property was disposed of in 2021.
- You ceased using it as your main home in 2021.
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