Entering a repayment of First-Time Homebuyer Credit on Form 5405 in ProConnect Tax

This article will assist you with entering a repayment of the First-Time Homebuyer Credit in the Individual return.

Table of contents:

Who must file Form 5405?

Per the IRS Instructions for Form 5405:

You must file Form 5405 with your 2023 tax return if you purchased your home in 2008 and you meet either of the following conditions.

1. You disposed of it in 2023.
2. You ceased using it as your main home in 2023.

If you and your spouse claimed the credit on a joint return, each spouse is treated as having been allowed half of the credit for purposes of repaying the credit. Each spouse who meets either condition 1 or 2 above must file a separate Form 5405.

Exceptions

The following are exceptions to the repayment rule.

• Condemnation or threat of condemnation. If the home is destroyed, or you sell the home through condemnation or under threat of condemnation to someone who isn't related to you and you don't acquire a new home within the 2-year period, the repayment with your return for the year in which the 2-year period ends is limited to the gain on the disposition as determined in Part III of Form 5405. The amount of the credit in excess of the gain doesn't have to be repaid.
• Transfer to spouse or ex-spouse. If the home was transferred to a spouse (or ex-spouse as part of a divorce settlement), the spouse who received the home is responsible for repaying the credit (regardless of whether he or she was the purchaser) if none of the other exceptions apply.
• Person who claimed the credit dies. 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.

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Follow these steps to enter the repayment of the First-Time Homebuyer Credit:

1. From the Input Return tab, go to Credits ⮕ CTC, EIC, Other Credits.
2. Click the Home tab at the top of the screen.
3. Scroll down to the Repayment of the First-Time Homebuyer Credit section.
4. Locate the 5405 #1: Repayment of Prior Year Credit subsection.
   • If MFJ, and the spouse must also repay the credit, use the second set of instructions below.
5. Enter the Date acquired.
6. Enter the amount in Original credit.
7. Enter the amount in Prior year installments (for home purchased in 2008).
8. From the Input Return tab, go to Income ⮕ Dispositions.
9. Complete the sale/disposition of the asset.
10. Click the blue Details button on the right.
11. Go to the Sale of Home tab.
12. Select Home #1 for the First-time homebuyer credit previously taken on this home (Click on arrow to select from list) field.

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Follow these steps to enter the credit for a MFJ return where the spouse must also repay the credit:

1. From the Input Return tab, go to Credits ⮕ CTC, EIC, Other Credits.
2. Go to the Home tab.
3. Scroll down to the Repayment of the First-Time Homebuyer Credit section.
4. Locate the 5405 #1: Repayment of Prior Year Credit section.
5. Enter the Date acquired.
6. Enter half of the amount in Original credit.
7. Enter half of the amount in Prior year installments (for home purchased in 2008).
8. Enter the full amount in Current year repayment [Override].
   • This is so that Form 1040 reflects the correct amount repaid.
9. From the Input Return tab, go to Income ⮕ Dispositions.
10. Complete the sale/disposition of the asset.
    • Only enter half the amount in the Sales price field.
11. Click the blue Details button on the right.
12. Go to the Sale of Home tab.
13. Select Home #1 for the First-time homebuyer credit previously taken on this home (Click on arrow to select from list) field.
14. From the Input Return tab, go to Credits ⮕ CTC, EIC, Other Credits.
15. Go to the Home tab.
16. Scroll down to the Repayment of the First-Time Homebuyer Credit section.
17. Remove any information from the 5405 #1: Repayment of Prior Year Credit section.
18. Scroll down to the 5405 #2: Repayment of Spouse Prior Year Credit subsection.
19. Enter the Date acquired.
20. Enter half of the amount in Original credit.
21. Enter half of the amount in Prior year installments (for home purchased in 2008).
22. Enter the full amount in Current year repayment [Override].
    • This is so that Form 1040 reflects the correct amount repaid.
23. From the Input Return tab, go to Income ⮕ Dispositions.
24. Enter a second sale/disposition of the asset.
    • Only enter half the amount in the Sales price field.
25. Click the blue Details button on the right.
26. Go to the Sale of Home tab.
27. Select Home #2 for the First-time homebuyer credit previously taken on this home (Click on arrow to select from list) field.

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How to access 5405 First Time Homebuyer Credit Account Look-up Tool if you receive an ERC0546 Reject from the IRS

0546 Form 5405 - First-Time Homebuyer Credit Repayment Amount (SEQ 0470)
cannot exceed the amount of First-Time Homebuyer Credit Received. In some instances, there is not a direct means to know this number. In response to this, the IRS has provided a direct online lookup tool to view the homebuyer credit amount.

To access this lookup tool, copy and paste the following URL link into your browser window: https://sa.www4.irs.gov/irfof-fthb/notice

Access the tool and enter your client's information in order to obtain the amount.

Note: Please do not contact ProcCnnect Support regarding the personally identifiable information required. For privacy and security reason, the agents do not have access to DOB or address information. The SSN is used only for lookup purposes and does not reveal any of the other required information.

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