Form 5405 - Repayment of Credit Due to Breaking Contract

If you claimed the First-time Homebuyer Credit, there are certain situations (e.g. if the home ceases to be your main residence within a three-year period following the date of purchase) in which you may need to repay the credit in full.

Any amount calculated to be repaid will appear on Line 7b of Schedule 2 (Form 1040) Additional Taxes. This will either reduce the refund on the return (the refund may become an amount due, depending on the repayment amount) or increase the amount owed.

If the credit was originally claimed on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit. Thus, two Forms 5405 Repayment of the First-Time Homebuyer Credit will be produced (and printed with the return) if repaying the credit on a joint return.

Information regarding the Homebuyer Credit repayment can be entered or reviewed through the Taxes section of the Federal Q&A.

To enter the repayment in to the TaxAct® program:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Taxes in the Federal Quick Q&A Topics menu to expand, then click Repayment of first-time homebuyer credit.
  3. Click Form 5405 if you disposed of the home or ceased using the home as your main home or click Worksheet to make the annual repayment and the home is still your main home.
  4. Continue with the interview process to enter all of the appropriate information.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.