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

SOLVEDby Intuit162Updated October 25, 2023

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

 

Per the IRS, the repayment requirement has expired for homes purchased after 2008. The repayment requirement continues to apply to homes purchased in 2008.

Table of contents:

Who must file Form 5405?
Exceptions
Follow these steps to enter the repayment of the First-Time Homebuyer Credit
Follow these steps to enter the credit for a MFJ return where the spouse must also repay the credit
How to access 5405 First Time Homebuyer Credit Account Look-up Tool if you receive an ERC0546 Reject from the IRS
‣ How do I assign a different firm to my tax return when we have multiple firms?

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:

 

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. Use the second set of instructions below for this situation.

  1. Go to Screen 38.2, Recovery Rebate, EIC, Residential Energy, Other Credits.
  2. Scroll down to the Repayment of the First-Time Homebuyer Credit section.
  3. 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.
  4. Enter the Date acquired.
  5. Enter the amount in Original credit.
  6. Enter the amount in Prior year installments (for home purchased in 2008).
  7. Go to Screen 17, Dispositions.
  8. Complete the sale/disposition of the asset.
  9. Scroll down to the Sale of Home section.
  10. Check the Sale of home (MANDATORY to compute exclusion) box.
  11. Select Home #1 for the First-time homebuyer credit previously taken on this home (Ctrl+T) 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. Go to Screen 38.2, Recovery Rebate, EIC, Residential Energy, Other Credits.
  2. Scroll down to the Repayment of the First-Time Homebuyer Credit section.
  3. Locate the 5405 #1: Repayment of Prior Year Credit section.
  4. Enter the Date acquired.
  5. Enter half of the amount in Original credit.
  6. Enter half of the amount in Prior year installments (for home purchased in 2008).
  7. Enter the full amount in Current year repayment [O].
    • This is so that Form 1040 reflects the correct amount repaid.
  8. Go to Screen 17, Dispositions.
  9. Complete the sale/disposition of the asset.
    • Only enter half the amount in the Sales price field.
  10. Scroll down to the Sale of Home section.
  11. Check the Sale of home (MANDATORY to compute exclusion) box.
  12. Select Home #1 for the First-time homebuyer credit previously taken on this home (Ctrl+T) field.
  13. Scroll down to the 5405 #2: Repayment of Spouse Prior Year Credit subsection.
  14. Enter the Date acquired.
  15. Enter half of the amount in Original credit.
  16. Enter half of the amount in Prior year installments (for home purchased in 2008).
  17. Enter the full amount in Current year repayment [O].
    • This is so that Form 1040 reflects the correct amount repaid.
  18. Go to Screen 17, Dispositions.
  19. Enter a second sale/disposition of the asset.
    • Only enter half the amount in the Sales price field.
  20. Scroll down to the Sale of Home section.
  21. Check the Sale of home (MANDATORY to compute exclusion) box.
  22. Select Home #2 for the First-time homebuyer credit previously taken on this home (Ctrl+T) 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 Lacerte 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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How do I assign a different firm to my tax return when we have multiple firms?

To assign a return to a particular firm in a multiple firm environment: 

  1. Navigate to Screen 1 - Client Information
  2. Scroll down the the Miscellaneous Info section
  3. Use the drop-down field labeled Firm Number to select the number of the firm you wish to assign for this return

To view what number has been assigned to the firm:

  1. Click on the Settings drop-down menu
  2. Click on the selection labeled Options
  3. Click on the tab labeled Firm Info. The number displayed before the firm in the Firm section is the Firm number you want to enter in this field.

Now when you view the forms on the screen or print the return, it should now display the correct firm information displayed.

Note: You must have multiple prep files installed in your Lacerte program for this to occur.

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