First Time Homebuyer Credit - Repayment of 2008 Credit

Form 1040, page 2, Line 59b – Repayment of First-Time Homebuyer Credit links from Form 5405.  Homebuyers that received the First Time Homebuyer Credit ($7,500 loan) from a 2008 home purchase, must start repayments in 2010 and have to complete Form 5405, Part III. 

See IRS Instructions for Form 5405

TaxWise:

·         go to 1040 page 2, line 59b

·         add Form 5405 pg2

·         Fill out Part III for disposition or change in use

·         Fill out Part IV for Repayment

Instructions for Form 5405 (Rev. 12-2011)

 

Homes purchased in 2008.

1. If you checked the box on line 13a, enter the smaller of line 16 or line 17 on line 18.

2. If you checked the box on line 13c or line 13d, enter the amount from line 16 on line 18.

3. If you checked the box on line 13f or 13g, the following rules apply.

a. If you checked the box on line 13f for an event that occurred in 2011 and you did not sell the home to a related person, your repayment is limited to the gain. If line 17 is less than line 16, divide line 17 by 14.0. Otherwise, divide line 14 by 15.0. This is the minimum amount you must pay with your 2011 return. Enter this amount (or a larger amount if you choose) on line 18. But see Repaying more than the minimum amount below.

b. If you checked the box on line 13f or 13g for an event that occurred in 2011 and you sold the home to a related person, divide line 14 by 15.0. This is the minimum amount you must pay with your 2011 return.  Enter this amount (or a larger amount if you choose) on line 18. But see Repaying more than the minimum amount below.

c. If you do not repay your credit earlier, you continue to repay the amount described above with every tax return for the next 13 years (2012 through 2024). But see (d) next for an exception.

d. If you do not acquire a new main home within 2 years of the event, (c) above does not apply. Instead, you must include any remaining installments as additional tax on the tax return for the year in which the 2-year period ends.

 

Repaying more than the minimum amount. If you purchased your home in 2008, you must repay at least 1/15 of the credit with every tax return during the repayment period until the year the credit is paid in full.  You can choose to repay more than the minimum amount with any tax return. Your final payment may be less than the required minimum amount.

 

Example. You claimed a $7,500 credit for a home with any tax return. Your final payment may be less than the required minimum amount purchased in 2008. You are required to repay at least $500 of the credit ($7,500 ¸ 15 years = $500) each year for 15 years starting with your 2010 tax return. However, you chose to repay $3,200 with your 2010 tax return, you make the required minimum payment of $500 with your 2011 tax return, and you choose to repay $3,500 with your 2012 tax return. The minimum repayment with your 2013 tax return is $300 (the balance of unpaid installments)—not $500.