Form 5405: First‑Time Homebuyer Credit and Repayment

Overview

Form 5405 is an IRS tax form originally used to claim the federal first‑time homebuyer tax credit and later revised to report repayment of that credit. The credit applied to homes purchased between April 9, 2008, and September 30, 2010. New purchases are no longer eligible, but some taxpayers who bought homes during that period may still need to use Form 5405 to report or repay the credit.

Credit basics

Program period: April 9, 2008 – September 30, 2010.
Credit amount: 10% of the home’s purchase price, subject to dollar caps.
2008 cap: up to $7,500 (treated like an interest‑free loan repaid over 15 years in many cases).
2009 cap: increased to $8,000.
Replacement‑home provision (for longtime residents purchasing a new main home) had a separate credit with a maximum typically up to $6,500 and usually did not require repayment.
The credit was refundable, so eligible taxpayers could receive a refund even if they had no tax liability.

Who qualified

First‑time homebuyers generally qualified. The IRS defined “first‑time” as not having owned a home in the prior three years.
Later rules expanded eligibility for certain buyers of replacement main homes.
Eligibility also depended on purchase price and modified adjusted gross income (MAGI) thresholds.
Documentation: Form 5405 was attached to the filer’s tax return along with a copy of the settlement statement (commonly the HUD‑1) or other evidence for certain home types (e.g., mobile homes).

Repayment rules

If the home was sold or ceased to be the taxpayer’s main residence within specified periods, repayment of the credit could be required.
For many 2008 purchases, the credit functioned as a loan repaid in equal installments over 15 years.
In other cases, repayment was triggered if the taxpayer disposed of the property or stopped using it as their main home within a statutory period (commonly 36 months in many scenarios).
Taxpayers who had claimed the credit but later became liable for repayment use Form 5405 to calculate and report the repayment amount.

2021 revision and when to file

Form 5405 was revised (November 2021) primarily to handle repayment reporting for taxpayers affected in 2021.
Use the revised Form 5405 with your 2021 tax return if you purchased the home in 2008 and either:
Disposed of the property in 2021, or
Ceased using it as your main home in 2021.
The revised form lets you:
Notify the IRS that the property was disposed of or ceased to be your main home (Part I).
Compute the amount of the credit that must be repaid on the 2021 return (Part II and, if applicable, Part III).

Filing notes and amendments

Historically, Form 5405 was filed with the original tax return claiming the credit. If eligible taxpayers failed to claim the credit on their 2009 return, they could file an amended return (Form 1040‑X) with Form 5405 attached to claim it, subject to statute of limitations rules.
Copies of settlement documents and required signatures should be retained and provided when filing.

Key takeaways

The first‑time homebuyer credit is no longer available for new purchases after Sept. 30, 2010.
Form 5405 remains relevant for taxpayers who claimed the credit on earlier purchases and now must report or repay it.
The revised Form 5405 (Nov. 2021) specifically addresses reporting and repayment for events occurring in 2021 for 2008 purchasers.
For forms and instructions, consult the IRS website or a tax professional to determine current filing requirements and to calculate any repayment owed.