IRS Form 5405 is the First Time Home Buyer Credit and Repayment of the Credit form. As the form title indicates, it is used for people who took the first time home buyer credit. Form 5405 is not a stand-alone form. It must be attached to your tax form 1040 or 1040X when filing your Federal income tax returns. As with any IRS form, take your time and review the instructions carefully before submitting your information to the government.
- Enter your name your name and Social Security number. Although this line is not prominent on the form, don’t overlook it. If for some reason your 5405 form is detached from your 1040, you want to make it easier for the IRS to find where the form belongs.
- Fill in the general information. Part I of Form 5405 asks for information such as the home address which qualifies for her credit, the purchase date and qualifying questions about the purchase date. This part can get a little confusing so make sure to download the instructions for Form 5405 and go over them carefully.
- Insert the credit information in Part II. The information you provide in Part II of Form 5405 is used as the basis for your tax calculations. For example, the first question on Part II asks for the purchase price of the new home. After you enter the purchase price you have to multiply the price by 10% and enter it on the next line. In addition to purchase price, you must explain how you qualify for the credit (whether a first-time homebuyer or a long-time resident). The credit varies depending on your qualification. Next enter your adjusted gross income. The information is then used to calculate your home buyer’s credit on line 10 of the form. Once you’ve calculated your credit on Form 5405, you must enter the figure from line 10 of Form 5405 and insert it in your 2009 1040 or 1040 X tax form (line 67).
- Determine if you have to complete page 2 of Form 5405. Page 2 is only necessary if you are using it to report a disposition or change in the use of your main home for which you took the credit. If you’re not doing either of those, then you’re done with this form. However, if you do fall into this category, you must complete page 2.
- Insert your name and Social Security at the top of page 2 then go on to completing Part III. Part III begins with entering the date on which you disposed or stopped using your main home for the original purposes for which you claimed the credit. From there you must answer a series of questions as to why a house was deposed or the use change.
- Enter the repayment of credit claimed for 2008. If you claimed credit on Form 5405 back in 2008, you must pull out that year’s form in order to enter the information required on line 14 of this form. Perform the next two calculations which include entering the gain on the sale of your home and determining whether the amount you entered on the 2008 Form 5405 is larger or smaller than the gain on your home. Enter the smaller of the two numbers on line 16. That number that you calculated on line 16 on Form 5405 the figure you carry over to line 60 of your 1040 tax form. On the dotted line next to line 60 insert “FTHCR” which stands for First Time Home-buyer’s Credit Refund.
- Attach Form 5405 to your 1040 form when submitting your taxes.
As with any IRS form, Form 5405 can be confusing. Make sure to download the complete instructions from the IRS website. If you’re not comfortable filling out the forms, please contact a qualified tax professional.