Instructions for Form 5405 (12/2011)

IRS Resources

Specific Instructions

Table of Contents

Part I. General Information

Line B. Enter the date you purchased the home (or the date you first occupied it if you constructed your main home).

Line C. See What To Attach to Your Return on page 2.

Line D. Check the “Yes” box if you (or your spouse if married):

Were on qualified official extended duty (defined below) outside the United States for at least 90 days during the period beginning after December 31, 2008, and ending before May 1, 2010, and
Were a member of the uniformed services or Foreign Service or an employee of the intelligence community (defined below) during the time period in (1) above.

If you do not meet both (1) and (2) above, you cannot claim the credit.

Qualified official extended duty.

You are on qualified official extended duty while:

Serving at a duty station that is at least 50 miles from your main home, or
Living in Government quarters under Government orders.

Uniformed services.

The uniformed services are:

The Armed Forces (the Army, Navy, Air Force, Marine Corps, and Coast Guard),
The commissioned corps of the National Oceanic and Atmospheric Administration, and
The commissioned corps of the Public Health Service.

Foreign Service member.

For purposes of the credit, you are a member of the Foreign Service if you are any of the following.

A Chief of mission.
An Ambassador at large.
A member of the Senior Foreign Service.
A Foreign Service officer.
Part of the Foreign Service personnel.

Employee of the intelligence community.

For purposes of the credit, you are an employee of the intelligence community if you are an employee of any of the following.

The Office of the Director of National Intelligence.
The Central Intelligence Agency.
The National Security Agency.
The Defense Intelligence Agency.
The National Geospatial-Intelligence Agency.
The National Reconnaissance Office and any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs.
Any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of the Treasury, the Department of Energy, and the Coast Guard.
The Bureau of Intelligence and Research of the Department of State.
Any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information.

Line E. Check the “ Yes ” box if you purchased the home from a related person or a person related to your spouse.

Otherwise, check the “ No ” box.

For the definition of a related person or a person related to your spouse, see item 9 or 10 on page 2 under Who Cannot Claim the Credit.

Line F. Check the box if you are choosing to claim the credit on your 2010 original or amended return for a main home purchased in 2011.

Part II. Credit

Line 1. The purchase price is the adjusted basis of your home on the date you purchased it. This includes certain settlement or closing costs (such as legal fees and recording fees) and your down payment and debt to purchase the home (such as a first or second mortgage or notes you gave the seller in payment for the home). If you build, or contract to build, a new home, your purchase price includes costs of construction. For more information about adjusted basis, see Pub. 551, Basis of Assets.

If you purchase property with a house that you use as your personal residence and a separate structure or unit that you do not use as your residence, you must allocate the purchase price between the portion of the property that you use as your residence and the portion of the property with the separate structure or unit. Examples include:

A house that you lived in and a detached garage or outbuilding that you use solely for business purposes.
A duplex with two separate dwelling units and you live in one unit and rent out the other unit.

Enter on line 1 the purchase price allocated to your residence.

Line 3. See Who Can Claim the Credit on page 1 to find out if you can claim the credit as a first-time homebuyer or a long-time resident.

Line 4. If two or more unmarried individuals buy a main home, they can allocate the credit among the individual owners using any reasonable method. If married individuals buy a main home and do not claim the credit on a joint return, they can also allocate the credit between them using any reasonable method. A reasonable method is any method that does not allocate any part of the credit to a co-owner not eligible to claim that part.

For first-time homebuyers, the total amount allocated cannot exceed the smaller of $8,000 or 10% of the purchase price. For long-time residents, the total amount allocated cannot exceed the smaller of $6,500 or 10% of the purchase price. For married taxpayers filing separate returns, the amount of the credit allocated to each spouse cannot exceed the smaller of (a) the amount on line 3 or (b) the excess of line 2 over the amount allocated to the other spouse on the other spouse's Form 5405, line 4.

Line 5. Your modified adjusted gross income is the amount from Form 1040, line 38, increased by the total of any:

Exclusion of income from Puerto Rico, and
Amount from Form 2555, lines 45 and 50; Form 2555-EZ, line 18; and Form 4563, line 15.

Part III. Disposition or Change in Use of Main Home for Which the Credit Was Claimed

Complete Part III if you claimed the first-time homebuyer credit on your original or amended 2008 or later return and you disposed of the home or it ceased to be your main home in 2011. This includes situations where:

You sold the home (including through foreclosure),
You converted the entire home to business or rental property,
You abandoned the home (except in connection with a sale or foreclosure),
The home was destroyed, condemned, or disposed of under threat of condemnation, or
The taxpayer who claimed the credit died in 2011.

Also complete Part III if you are claiming the credit on your 2011 return and line 12, 13f, 13g, or 13h applies.

Sales (including through foreclosure). In the case of a sale (including through foreclosure) of your main home, you must repay the credit with the tax return for the tax year in which the sale is completed. In general, this will occur when the purchaser (or lender) obtains title to your home.

Line 11. If your home was destroyed or condemned, or you disposed of the home under threat of condemnation, enter the date it was destroyed, condemned, or disposed of under threat of condemnation (or the date it ceased to be your main home, whichever is earlier).

Line 12. Check the box if you (or your spouse if married):

Are, or were, a member of the uniformed services or Foreign Service or an employee of the intelligence community (defined earlier), and
Sold the home or the home ceased to be your main home after 2008 because you (or your spouse if married) received Government orders to serve on qualified official extended duty (defined below).

If you (or your spouse if married) meet both of these conditions, you (and your spouse if married) do not have to repay the credit.

Qualified official extended duty.

You are on qualified official extended duty while:

Serving at a duty station that is at least 50 miles from your main home, or
Living in Government quarters under Government orders.

You are on extended duty when you are called or ordered to active duty for a period of more than 90 days or for an indefinite period.

Lines 13a, 13b, and 13c. See item 9 under Who Cannot Claim the Credit on page 2 for the definition of a related person. If the person does not meet the definition of a related person, that person is not related to you.

If you sold your home to someone who is not related to you, complete Part V to figure the gain or (loss) on the sale.

Line 13d. See the Tip on page 3 for information about converting your entire home to business or rental use.

Do not check this box if you converted only a part of the home to rental or business use and you continue to use the other part as your main home. Do not file form 5405 for this conversion. If you purchased your home in 2008, enter your annual repayment on your 2011 Form 1040, line 59b, or Form 1040NR, line 58b, whichever applies.

Example 1.

You claimed the credit for a home you purchased in 2009. In 2011, you converted the basement of your home for use as a child care business. You continued to use the rest of your home as your main home in 2011. You do not have to repay any of the credit with your 2011 return or file Form 5405.

Example 2.

The facts are the same as in Example 1, except that you purchased the home in 2008. You are required to repay at least 1/15 of the credit with your 2011 return. You do not have to file form 5405. Instead, enter the repayment on your 2011 Form 1040, line 59b, or Form 1040NR, line 58b, whichever applies.

Example 3.

You claimed the credit for a home you purchased in 2009. In 2011, you moved out of the home and converted it to rental property. You must check the box on line 13d and complete Part IV to figure the amount of credit you have to repay with your 2011 return.

Example 4.

The facts are the same as in Example 3 except that you purchased the home in 2008. You must check the box on line 13d and complete Part IV. In this case, you must repay the balance of the credit with your 2011 tax return.

Lines 13f and 13g—Home destroyed or sold through condemnation or under threat of condemnation. If your home was destroyed or you sold your home through condemnation or under threat of condemnation to a person who is not related to you, the amount of the credit you have to repay (if any) is limited to the gain on the disposition. Complete Part V to determine whether you have a gain. Check the box on line 13f if you have a gain. If you do not have a gain, you do not have to repay any of the credit. Check the box on line 13g if you do not have a gain. Then read the instructions below for line 13f or line 13g, whichever applies.

Line 13f.

If you acquired or plan to acquire a new home within 2 years of the event, the following rules generally apply.

For homes purchased in 2008, you continue to repay the credit over a 15-year period that began with your 2010 tax return. Complete Part IV to figure your installment payment for 2011 if the event was not a sale to a related person.
- For homes purchased in 2009 or a later year, you do not have to repay the credit if you acquire a new main home within 2 years of the event and you own and use it as your main home during the remainder of the 36-month period.

If you do not acquire a new home within the 2-year period, the following rules generally apply.

If you purchased the home in 2008 and the event occurred in 2009, you generally must repay the balance of the credit in full with your 2011 return. You do not have to file Form 5405. Instead, enter the repayment on your 2011 Form 1040, line 59b, or Form 1040NR, line 58b, whichever applies.
- If you purchased the home in 2008 and the event occurred after 2009, your annual repayment requirement continues until the year in which the 2-year period ends. On the tax return for the year in which the 2-year period ends, you must include all remaining installments as additional tax.
  - If you purchased the home in 2009 (or a later year), you must generally include the credit as additional tax on the tax return for the year in which the 2-year period ends. For example, if the 2-year period ended in 2011, complete Part IV to figure the amount you have to repay with your 2011 return.

Line 13g. If you do not have a gain, you do not have to repay any of the credit, unless you sold your home under threat of condemnation to someone who is related to you. If the buyer is related to you, the rules explained above for line 13f apply, except that you must repay the entire amount of the credit you claimed if you did not acquire a new home within the 2-year period. This is true even if you had a loss on the sale or you had a gain that is less than the credit.

Line 13h. Do not check this box if you are filing a joint return for 2011 with the deceased taxpayer and you claimed the credit on a joint return. If you did not dispose of the home and the home did not cease to be your main home, do not check any box on line 13. If you did dispose of the home or it ceased to be your main home, check the appropriate box on lines 13a through 13g. (These instructions also apply if you are not filing a joint return with the deceased taxpayer for 2011.)

Part IV. Repayment of Credit Claimed for 2008, 2009, or 2010

If you purchased the home in 2008 and you owned it and used it as your main home during all of 2011, you must continue repaying the credit with your 2011 tax return. You do not have to file Form 5405. Instead, enter the repayment on your 2011 Form 1040, line 59b, or Form 1040NR, line 58b, whichever applies.

If you are required to repay the credit because you disposed of a home you purchased in 2008, 2009, or 2010, or that home ceased to be your main home, you generally must repay the entire credit (or the balance of the unpaid credit in the case of a 2008 purchase) with your 2011 tax return. An exception applies if your home was destroyed or condemned, or you disposed of the home under threat of condemnation, and you did not acquire a new main home within 2 years of the event. (See the instructions for lines 13f and 13g earlier.) Another exception applies for certain members of the uniformed services or Foreign Service or employees of the intelligence community (see the instructions for line 12 on page 4).

If you and your spouse claimed the credit on a joint return, each of you must file a separate Form 5405 to notify the IRS that you disposed of the home or ceased to use it as your main home.

Line 14. If you claimed the credit on a joint return for 2008, 2009, or 2010 but your spouse died, enter one-half of the credit you claimed. The remaining half (that is, your spouse's half) does not have to be repaid. If you and your spouse claimed the credit and the home was later transferred to you by your spouse (or ex-spouse as part of a divorce settlement), enter the total credit claimed by both you and your spouse (or ex-spouse).

Enter the credit you claimed for a home purchased in 2008 that was destroyed or that you sold through condemnation or under threat of condemnation. Also enter the credit you claimed for a home purchased in 2009 that was destroyed or that you sold through condemnation or under threat of condemnation in 2009 if you did not acquire a new home within 2 years of the event.

Line 16. If you checked the box on line 13f and the event was not a sale to a related person, go to line 17.

If you checked the box on line 13f or 13g and the event was a sale to a related person, skip line 17 and go to line 18.

Item 9 under Who Cannot Claim the Credit on page 2 explains whether the buyer is related to you.

Line 17. If any of the following conditions apply, enter on line 17 the gain from line 25.

You checked the box on line 13a.
You checked the box on line 13f, you purchased your home in 2008, and the event was not a sale to a related person. Item 9 under Who Cannot Claim the Credit on page 2 explains whether the buyer is related to you.
You checked the box on line 13f, you purchased your home in 2009, the event occurred in 2009, and the event was not a sale to a related person. Item 9 under Who Cannot Claim the Credit on page 2 explains whether the buyer is related to you.

If none of the above conditions apply, leave line 17 blank.

Line 18. The amount you enter on line 18 depends on when you purchased your home.

Homes purchased in 2009 or a later year.

Enter the smaller of line 16 or line 17 on line 18 if you meet either of the following conditions.

You checked the box on line 13a.
You checked the box on line 13f for an event that occurred in 2009, you did not acquire a new home within 2 years of the event, and the disposition was not a sale to a related person.

Enter the amount from line 16 on line 18 if you meet either of the following conditions.

You checked the box on line 13c or 13d.
You checked the box on line 13f or 13g for an event that occurred in 2009, you did not acquire a new home within 2 years of the event, and the disposition was a sale to a related person.

Homes purchased in 2008.

If you checked the box on line 13a, enter the smaller of line 16 or line 17 on line 18.
If you checked the box on line 13c or line 13d, enter the amount from line 16 on line 18.
If you checked the box on line 13f or 13g, the following rules apply.
1. 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.
2. 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.
3. 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.
4. 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 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.

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