Why can't I answer the first time homebuyer credit question? Turbo Tax won't allow me to choose the option that reports the sale of the home prior to 12/31/16...

bcsedam · ‎June 3, 2019

Opus 17 · ‎June 3, 2019

If you have the FTHB credit from 2008 that was a loan, then it is normally repaid over 15 years. However, if you sell, move out, transfer the home to a spouse in a divorce, convert it to a rental, or for any other reason stop using it as your main home, repayment of the remaining credit is immediately due.

The amount of repayment depends on the circumstances of the transaction. If you convert to a rental, the credit is immediately due in full. If you transfer to a spouse in a divorce, the spouse become responsible for your share of the credit. If you sell, you owe repayment up to the full remaining amount from the proceeds of the sale, depending on how much gain you have. For example, if you owe $3000 and you only have a $1000 capital gain on the sale, you pay back the $1000 and then you are free and clear. If you owe $3000 and you have a $10,000 gain, you pay back the full $3000.

All this is reported on a form 5405 for the year you stopped using the house as your main home. If that was not 2017, you will need to go back and file an amended return for the year you stopped using the home as your main home, and pay off in full (or whatever other amount is owed.) You don't owe any repayment in 2017, but your e-filed return might be rejected by the IRS for not including a payment. In that case, print your return and mail it in. If there are years in between when you made $500 repayments that you didn't actually owe, you can amend for those years to get that money back. (In other words, if you sold the house in 2015 and did not file the form, and paid an extra $500 in 2016, then now you need to amend for 2015 and pay off the credit, plus amend for 2016 to get the $500 back.)

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

View solution in original post

VolvoGirl · ‎June 3, 2019

If you sold it a prior year then it goes on that year’s return. There shouldn’t be any credit left to pay back in 2017. Do you need to amend 2016 or prior?

bcsedam · ‎June 3, 2019

Yes I probably do, but I filed 2016 with a CPA so I'm not sure what the process would be for that. Thanks!

VolvoGirl · ‎June 3, 2019

Yes check with the CPA and your return and see if the sale was reported right and the credit paid back. Then don’t enter anything on 2017 for it or about it and don’t try to pay the 500. Try to skip this part. Why did you start the homebuyer section?

bcsedam · ‎June 3, 2019

My federal return was rejected because the e-file database indicated a First Time Homebuyer Installment Payment was due for my SSN.

bcsedam · ‎June 3, 2019

I checked my 2016 return and confirmed that my CPA failed to file the 5405 and just entered the annual $500 payment on line 60b. I will definitely follow up with him. Thanks!

Opus 17 · ‎June 3, 2019

If you have the FTHB credit from 2008 that was a loan, then it is normally repaid over 15 years. However, if you sell, move out, transfer the home to a spouse in a divorce, convert it to a rental, or for any other reason stop using it as your main home, repayment of the remaining credit is immediately due.

The amount of repayment depends on the circumstances of the transaction. If you convert to a rental, the credit is immediately due in full. If you transfer to a spouse in a divorce, the spouse become responsible for your share of the credit. If you sell, you owe repayment up to the full remaining amount from the proceeds of the sale, depending on how much gain you have. For example, if you owe $3000 and you only have a $1000 capital gain on the sale, you pay back the $1000 and then you are free and clear. If you owe $3000 and you have a $10,000 gain, you pay back the full $3000.

All this is reported on a form 5405 for the year you stopped using the house as your main home. If that was not 2017, you will need to go back and file an amended return for the year you stopped using the home as your main home, and pay off in full (or whatever other amount is owed.) You don't owe any repayment in 2017, but your e-filed return might be rejected by the IRS for not including a payment. In that case, print your return and mail it in. If there are years in between when you made $500 repayments that you didn't actually owe, you can amend for those years to get that money back. (In other words, if you sold the house in 2015 and did not file the form, and paid an extra $500 in 2016, then now you need to amend for 2015 and pay off the credit, plus amend for 2016 to get the $500 back.)

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*

Why can't I answer the first time homebuyer credit question? Turbo Tax won't allow me to choose the option that reports the sale of the home prior to 12/31/16...