Form 5405 explained: How (and when) to repay the first-time homebuyer credit

Still making payments for a home you haven’t lived in for years

If you bought your home in 2008 and claimed the First-Time Homebuyer Credit, the IRS might still be expecting a check. And if your living situation has changed – you might need to file Form 5405.

Let’s break down who needs to file, when repayment kicks in, and what exceptions could save you money.

What is IRS Form 5405?

Form 5405 is used to report and repay the First-Time Homebuyer Credit that many taxpayers claimed when buying a home in 2008.

At the time, this credit offered up to $7,500 as an interest-free loan – with the catch that it had to be repaid in equal installments over 15 years, starting in 2010.

Why 5405 still matters – even years later

If you claimed the credit in 2008 and have been repaying it annually through your tax return, you're not alone.

But if you’ve sold the home, moved out, or stopped using it as your main residence, you may now owe the entire remaining balance – and Form 5405 is how you report that change.

What if I bought my home after 2008?

Different rules apply.

The 2009 and 2010 versions of the First-Time Homebuyer Credit were not loans for most taxpayers and generally don’t require repayment – unless the home was sold or converted early.

So if you bought your home in 2009 or later, this form likely doesn't apply to you.

Who needs to file Form 5405?

Required if...

You need to file Form 5405 with your tax return if you claimed the 2008 First-Time Homebuyer Credit and any of the following happened in 2024:

• You sold the home (even at a gain or loss)
• You moved out or stopped using it as your main home
• You converted the home into a rental, vacation property, or business use

In these cases, the IRS wants to know – and you may have to repay the remaining balance of your credit all at once.

Not required if...

You do not need to file Form 5405 if:

• You still live in the same home as your main residence – simply continue making annual repayments via Schedule 2 (Form 1040), line 10
• You purchased the home in 2009 or later, and no triggering event (like sale or change of use) has occurred.

Exceptions to repayment

Some circumstances allow you to avoid repaying the remaining credit – even if you no longer live in the home.

When you don’t owe the rest of the credit

• Home destroyed, condemned, or sold at a loss. If the home was sold for less than you paid (and not to a related party), you may not owe the remaining balance.
• Transferred to a spouse or ex-spouse. In the case of divorce or other property transfers, the new owner becomes responsible for repayment.
• A taxpayer passed away. If the credit recipient dies, the debt is typically forgiven – except in the case of jointly filed returns, where the surviving spouse continues repayment.

Quick comparison: Do you still owe?

How to complete Form 5405

Filing Form 5405 is fairly straightforward – if you know where to look.

The form is split into three main parts, each dealing with a different aspect of the credit and its repayment.

Part I – Report the change

Start by detailing what happened to your home. Did you sell it? Convert it to a rental? Move out?

This section is where you notify the IRS of the change in ownership or use that triggered the repayment requirement.

Part II – Calculate your repayment

Here, you’ll determine how much of the original First-Time Homebuyer Credit you still owe.

If you're in Year 15 of your repayment schedule, you might only owe a small amount. If you've stopped using the home as your main residence, you may need to repay the entire remaining balance.

Part III – Report gain or loss (if sold)

If you sold the home, this section asks you to calculate your gain or loss.

This can affect whether you need to repay the full balance or possibly nothing at all (for example, if sold at a loss to an unrelated party).

Form 5405 preview

Common mistakes to avoid

• Forgetting to file 5405 when required
• Using the wrong figures when calculating gain/loss
• Assuming you’re exempt from repayment without checking the exceptions
• Reporting on Schedule 2 instead of Form 5405 when a disposition occurred

What if I don’t file Form 5405 when required?

If you skip Form 5405 when you should have included it, here’s what can happen:

• IRS notices and letters requesting more information
• Penalties and interest on missed repayments
• Delays in refund processing while your return is flagged
• The need to file an amended return (Form 1040-X), which adds time and complexity

Pro Tip: If in doubt, file it – or consult a tax expert.

Where to enter repayment if Form 5405 is not required

Still living in the same home you bought in 2008?

You’re not off the hook entirely – but you don’t need Form 5405. Instead, your annual repayment (typically $500 per year for a $7,500 credit) goes on:

• Schedule 2 (Form 1040), line 10.  Label it as “First-Time Homebuyer Credit Repayment” and continue paying until the 15-year mark is up – unless you hit an exception.

Pro tips for avoiding issues

Here’s how to stay ahead of the IRS – and avoid paperwork headaches.

• Keep your original home purchase documents. You'll need this info to verify your purchase date, cost, and repayment schedule.
• Track your repayment progress. Know what year you're in and how much you’ve repaid. The IRS doesn’t send annual reminders.

Re-evaluate if your situation changes. Sold the home? Rented it out? Moved? Any of these can trigger Form 5405.