Topic Number 611 - Repayment of the First-Time Homebuyer Credit
Repayment of the Credit
General repayment rules for 2008 purchases. If you were allowed the first-time homebuyer credit for a qualifying home purchase made between April 9, 2008, and December 31, 2008, you generally must repay the credit over 15 years. To repay the credit, you must increase your federal income taxes by 6⅔% (or 1/15) of the amount of the credit for each taxable year in the 15-year repayment period. The repayment period begins with the second taxable year following the year of qualifying home purchase. There are exceptions that may require you to accelerate the repayment (discussed later).
- Example – You were allowed a $7,500 first-time homebuyer credit for 2008. You must repay the credit. Your 15-year repayment period started with 2010, the second taxable year from 2008. To repay the credit, you must add $500 (which is 6⅔% of $7,500) to your federal income tax for each taxable year in the repayment period.
General repayment rules for post-2008 purchases. For qualifying purchases made after 2008, the repayment requirement of the first-time homebuyer credit is generally waived. There are exceptions that may require you to accelerate the repayment (discussed next).
Acceleration of repayment. In general, in the case of a home purchased in 2008 for which you received the first-time homebuyer credit, if you dispose of it, or you (and your spouse if married) stop using it as a principal residence in any taxable year during a 15-year repayment period, the credit repayment is accelerated. Similarly, in the case of a home purchased after 2008 for which you received the credit, if you dispose of it or you (and your spouse if married) stop using it as a principal residence within 36 months from the purchase date, the credit repayment is accelerated.
If you're subject to an accelerated credit repayment, you must increase your federal income tax for the year of disposition or cessation of use by the amount of any excess of the credit allowed over the sum of the additional taxes paid under the credit repayment requirement. However, there are exceptions.
In the case of a sale of the home to an unrelated person, the increase in tax due to accelerated repayment is limited to the amount of gain (if any) from the sale. To determine the gain for this purpose, you must reduce the adjusted basis in the home by the amount of the first-time homebuyer credit that hasn't been repaid.
In the case of an involuntary conversion of the home, the accelerated repayment requirement doesn't apply if you acquire a new principal residence within two years from the date when the disposition or the cessation of use occurs. The general repayment rules apply to the new principal residence as if it were the converted home.
If a person who claimed the credit dies, repayment of the remaining balance of the credit isn't required unless the credit was claimed on a joint return. If the credit was claimed on a joint return, then the surviving spouse is required to continue repaying his or her half of the credit (regardless of whether he or she was the purchaser) if none of the other exceptions apply.
Reporting the repayment. If required to repay the first-time homebuyer credit, you must file a federal income tax return, even if the gross income doesn't exceed the return filing threshold. If you made a qualifying home purchase in 2008 and owned and used the home as a principal residence in all of 2018, you must enter the additional federal income tax on Form 1040, Schedule 4.pdf, Other Taxes. You don't need to attach Form 5405.pdf, Repayment of the First-Time Homebuyer Credit. If you dispose of the home or if you (and your spouse if married) stop using it as your principal residence in 2018, you must attach a completed Form 5405 for you (and your spouse if married) to Form 1040.pdf.
More Information. For more detailed information on the first-time homebuyer credit, refer to the Form 5405 Instructions and First-Time Homebuyer Credit: Questions and Answers. For the total amount of your credit or your repayment amount, refer to the First-Time Homebuyer Credit Account Look-up tool.