WHAT IS Form 5405: First-Time Homebuyer Credit And Repayment Of The Credit
Form 5404, First-Time Homebuyer Credit and Repayment of the Credit was 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 that was available from April 9, 2008 through July 2010. First-time homebuyers applying for the credit could not have owned another home within three years of the new home purchase, and either the purchase price of the home or the homebuyer's modified adjusted gross income (MAGI) could not exceed a certain threshold. The amount of the credit was the lesser of either a fixed percentage of the home's purchase price or a fixed dollar value.
If the property the credit was received for was sold within 36 months of the purchase date or if the home was no longer the taxpayer's main home, the homeowner was generally responsible for repaying at least part of the credit.
BREAKING DOWN Form 5405: First-Time Homebuyer Credit And Repayment Of The Credit
Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, was the form used by the Internal Revenue Service (IRS) to allow the homebuyer taxpayer to claim a tax credit for a percentage of the purchase price of a new home during the time period from April 9, 2008 through July 1, 2010. When the program began in 2008, the allowable tax credit was 10 percent of the purchase price of the home up to a cap of $7,500, and the cap went up to $8,000 in 2009. Homes with purchase prices of at least $75,000 to $80,000 allowed the homebuyer to claim the full tax credit.
A first-time homebuyer tax credit could provide the tax payer with a refund even if no taxes were owed, as there was no lower limit on income so a person without an income significant enough to be taxed could still buy a home and claim the first-time homebuyer tax credit.
Filing Form 5405
Form 5405 was attached to the homebuyer's tax return, along with a copy of the settlement statement, which is typically the HUD-1 Form. The form contained all parties' names, signatures, the property's address, the purchase date and the purchase price. Some types of homes, such as mobile homes, could use other forms of contracts to demonstrate that the property met requirements for the credit.
Qualified homebuyers who purchased a qualified home but did not claim the tax credit on their 2009 returns were encouraged to file an amended 1040X return with Form 5405 attach to claim their credit.