DEFINITION of 'Form 5405: First-Time Homebuyer Credit And Repayment Of The Credit'
A tax form distributed by the Internal Revenue Service (IRS) and used by first-time homeowners or long-time residents of a home to claim a tax credit. First-time homebuyers applying for the credit cannot have owned another home within three years of the new home purchase, or if either the purchase price of the home or the homebuyer's adjusted gross income (AGI) exceeds a certain threshold. The amount of the credit is the lesser of either a fixed percentage of the home's purchase price or a fixed dollar value.
If the property the credit is received for is sold within 36 months of the purchase date or if the home no longer is the taxpayer's main home, the homeowner generally will be responsible for repaying at least part of the credit.
BREAKING DOWN 'Form 5405: First-Time Homebuyer Credit And Repayment Of The Credit'
Form 5405 is attached to the homebuyer's tax return, along with a copy of the settlement statement (typically the HUD-1 Form). The form contains all parties' names, signatures, the property's address, the purchase date and the purchase price. Some types of homes, such as mobile homes, can use other forms of contracts to demonstrate that the property meets requirements for the credit.
A first-time homebuyer tax credit may provide the tax payer with a refund even if no taxes are owed.