5405 First-Time Homebuyer Credit

Form

5405

OMB No. 1545-0074

First-Time Homebuyer Credit
©

2008

Attach to Form 1040

Department of the Treasury
Internal Revenue Service

Attachment
Sequence No.

Name(s) shown on return

Your social security number

Part I

163

General Information

A

Address of home qualifying for the credit (if different from the address shown on return)

B

Date acquired (see instructions)

C

If you are choosing to claim the credit on your 2008 return for a main home bought after December 31, 2008, and before
©
July 1, 2009, check here (see instructions)

Part II
1

2
3

4
5
6

Credit

Enter the smaller of:
● $7,500 ($3,750 if married filing separately), or
● 10% of the purchase price of the home.
If someone other than a spouse also held an interest in the home, enter only your share of this
amount (see instructions)
2
Enter your modified adjusted gross income (see instructions)
Is line 2 more than $75,000 ($150,000 if married filing jointly)?
No. Skip lines 3 through 5 and enter the amount from line 1 on line 6.
Yes. Subtract $75,000 ($150,000 if married filing jointly) from the
3
amount on line 2 and enter the result
Divide line 3 by $20,000 and enter the result as a decimal (rounded to at least three places).
Do not enter more than 1.000
Multiply line 1 by line 4
Subtract line 5 from line 1. This is your credit. Enter here and on Form 1040, line 69

1

4
5
6

X

.

General Instructions

Who Cannot Claim the Credit

Section references are to the Internal Revenue Code.

You cannot claim the credit if any of the following apply.
1. Your modified adjusted gross income is $95,000 or
more ($170,000 or more if married filing jointly). See the
instructions for line 2.
2. You are, or were, eligible to claim the District of
Columbia first-time homebuyer credit for any tax year.
3. Your home financing comes from tax-exempt
mortgage revenue bonds.

Purpose of Form
Use Form 5405 to claim the first-time homebuyer credit.
The credit may give you a refund even if you do not owe
any tax.
The credit operates much like an interest-free loan. You
generally must repay it over a 15-year period. See
Repayment of Credit on page 2.

Who Can Claim the Credit
In general, you can claim the credit if you are a first-time
homebuyer. You (and your spouse if married) are
considered a first-time homebuyer if:
● You purchased your main home located in the United
States after April 8, 2008, and before July 1, 2009.
● You did not own any other main home during the
3-year period ending on the date of purchase.
If you constructed your main home, you are treated as
having purchased it on the date you first occupied it.
Main home. Your main home is the one you live in most
of the time. It can be a house, houseboat, housetrailer,
cooperative apartment, condominium, or other type of
residence.

For Paperwork Reduction Act Notice, see page 2.

4. You are a nonresident alien.
5. Your home is located outside the United States.
6. You sell the home, or it ceases to be your main
home, before the end of 2008.
7. You acquired your home by gift or inheritance.
8. You acquired your home from a related person.
A related person includes:
a. Your spouse, ancestors (parents, grandparents,
etc.), or lineal descendants (children, grandchildren,
etc.).
b. A corporation in which you directly or indirectly
own more than 50% in value of the outstanding stock
of the corporation.
c. A partnership in which you directly or indirectly
own more than 50% of the capital interest or profits
interest.

Cat. No. 11880I

Form

5405

(2008)

Form 5405 (2008)

Page

2

For more information about related persons, see
Nondeductible Loss in Chapter 2 of Pub. 544, Sales and
Other Dispositions of Assets. When determining whether
you acquired your main home from a related person,
family members in that discussion (except item 7) include
only the people mentioned in 8a above.

● If you die, any remaining annual installments are not
due. If you filed a joint return and then you die, your
surviving spouse would be required to repay his or her
half of the remaining repayment amount.

Amount of the Credit

Part I General Information

Generally, the credit is the smaller of:

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

● $7,500 ($3,750 if married filing separately), or
● 10% of the purchase price of the home.
You are allowed the full amount of the credit if your
modified adjusted gross income (MAGI) is $75,000 or less
($150,000 or less if married filing jointly). The phase-out of
the credit begins when your MAGI exceeds $75,000
($150,000 if married filing jointly). The credit is eliminated
completely when your MAGI reaches $95,000 ($170,000 if
married filing jointly).

Repayment of Credit
You generally must repay the credit over a 15-year period
in 15 equal installments. The repayment period begins 2
years after the year in which you claimed the credit. Thus,
if you claim the credit on your 2008 tax return, the
repayment period begins in 2010 and you must include
the first installment as additional tax on your 2010 tax
return.
If your home ceases to be your main home before the
15-year period is up, you must include all remaining
annual installments as additional tax on the return for the
tax year that happens. This includes situations where you
sell the home or convert it to business or rental property.
If you and your spouse claim the credit on a joint
return, each spouse is treated as having been allowed
half of the credit for purposes of repaying the credit.
Example 1. You claimed a $7,500 credit on your 2008
tax return. You must include $500 ($7,500 4 15) as
additional tax on your 2010 tax return and on each tax
return for the next 14 years.
Example 2. You claimed a $7,500 credit on your 2008
tax return. In 2009, you sold the home to your son. You
must include $7,500 as additional tax on your 2009 tax
return.
Exceptions. The following are exceptions to the
repayment rule.
● If you sell the home to someone who is not related to
you, the repayment in the year of sale is limited to the
amount of gain on the sale. (See item 8 under Who
Cannot Claim the Credit for the definition of a related
person.) When figuring the gain, reduce the adjusted
basis of the home by the amount of the credit you did not
repay.
● If the home is destroyed, condemned, or disposed of
under threat of condemnation, and you acquire a new
main home within 2 years of the event, you continue to
pay the installments over the remainder of the 15-year
repayment period.
● If, as part of a divorce settlement, the home is
transferred to a spouse or former spouse, the spouse
who receives the home is responsible for making all
subsequent installment payments.

Specific Instructions

Line C. You can choose to claim the credit on your 2008
Form 1040 for a main home purchased after December
31, 2008, and before July 1, 2009. If you make this
choice, check the box.

Part II Credit
Line 1. If two or more unmarried individuals buy a main
home, they can allocate the credit among the individual
owners using any reasonable method. The total amount
allocated cannot exceed the smaller of $7,500 or 10% of
the purchase price. See Purchase price below.
Note. A reasonable method is any method that does not
allocate all or a part of the credit to a co-owner who is
not eligible to claim that part of the credit.
Purchase price. 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 (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 can
include costs of construction. For more information about
adjusted basis, see Pub. 551, Basis of Assets.
Line 2. 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.
Paperwork Reduction Act Notice. We ask for the
information on this form to carry out the Internal Revenue
laws of the United States. You are required to give us the
information. We need it to ensure that you are complying
with these laws and to allow us to figure and collect the
right amount of tax.
You are not required to provide the information
requested on a form that is subject to the Paperwork
Reduction Act unless the form displays a valid OMB
control number. Books or records relating to a form or its
instructions must be retained as long as their contents
may become material in the administration of any Internal
Revenue law. Generally, tax returns and return information
are confidential, as required by section 6103.
The average time and expenses required to complete
and file this form will vary depending on individual
circumstances. For the estimated averages, see the
instructions for your income tax return.
If you have suggestions for making this form simpler,
we would be happy to hear from you. See the instructions
for your income tax return.