General Repayment Rules: 2008 Purchases
If you purchased your first home between April 9, 2008, and December 31, 2008, and received the First-Time Homebuyer Credit, you're generally required to repay it over 15 years.
Here's the gist:
You'll increase your federal income taxes by 6 ⅔% (or 1/15) of the credit amount each year.
The repayment period kicks off two years after the purchase year.
Example: Let's say you received a $7,500 credit in 2008. Your 15-year repayment period started in 2010. You'll need to add $500 (6 ⅔% of $7,500) to your federal income tax each year during the repayment period.
General Repayment Rules: Post-2008 Purchases
Generally, if you bought your home after 2008, you're off the hook for repayment, but there are exceptions!
Uh Oh, Accelerated Repayment
Life happens! If you sell your home or stop using it as your primary residence, you might have to accelerate your repayment.
2008 Purchases: If this happens during the 15-year repayment period, the credit repayment is accelerated.
Post-2008 Purchases: If you sell or stop using the home as your primary residence within 36 months of buying it, repayment could be accelerated.
If accelerated repayment applies, you'll need to increase your federal income tax for that year by the outstanding credit amount, less any repayments you've already made.
Are There Exceptions to Accelerated Repayment?
Yes, there are!
Sale to an Unrelated Person: The increase in tax due to accelerated repayment is capped at the amount of gain (if any) from the sale. To figure out the gain, you'll need to reduce the home's adjusted basis by the un-repaid portion of the First-Time Homebuyer Credit.
Involuntary Conversion: If your home undergoes an involuntary conversion (like a fire or natural disaster), the accelerated repayment doesn't apply if you acquire a new primary residence within two years. The regular repayment rules then apply to the new home.
Death: If the person who claimed the credit passes away, the remaining balance doesn't need to be repaid unless the credit was claimed on a joint return. In that case, the surviving spouse must continue repaying their half of the credit, assuming no other exceptions apply.
Reporting the Repayment
Even if you don't usually file taxes, you need to file a federal income tax return if you're repaying the First-Time Homebuyer Credit.
If you purchased your home in 2008 and lived there throughout 2024, report the additional federal income tax on Schedule 2 (Form 1040), Additional Taxes PDF. No need to attach Form 5405, Repayment of the First-Time Homebuyer Credit.
If you sold the home or stopped using it as your primary residence in 2024, you'll need to attach a completed Form 5405 to Form 1040 or Form 1040-SR.