You cannot file a Form 5405 for a home that stopped being your
main home through sale, foreclosure, transition to a rental etc., prior to January
1, 2016 on your 2016 tax return. If the home ceased being your main
home in a prior year, you will need to file an amended return (Form 1040X) for
the year of the event, reporting the sale of the home, and file a Form 5405 with the amendment reflecting the
sale of the house and recapture any credit repayment you may owe. Additionally,
if the IRS is expecting a credit repayment for a home that you have already
disposed of, your 2016 e-file return
will most likely be rejected and you will need to file a paper-return (see link
to directions below). Once the amendment is processed reporting the disposition
of the house you should no longer see IRS e-file rejects due to this.
How to paper file a return:
TurboTax FAQ: How do I print and
mail my return in TurboTax Online?
How to amend a prior year return:
TurboTax FAQ: How
to Amend (Change or Correct) a Return You Already Filed
You will need to gather different information depending on how
you disposed of your home.
For a sale you will need to know:
1. the amount of the
Homebuyer Credit received
2. the total amount of the
credit you have repaid so far
3. the sale amount of your
home
4. the selling expenses of
your home
5. and the adjusted cost
basis of your home
For the sale of your home information start with your settlement
statement. A settlement statement usually comes from the
closing of your real estate transaction. It may be a form entitled HUD-1,
Settlement Statement or some other settlement statement. The statement shows
all parties' names, the property address, sales price and the date of purchase.
For selling expenses start with the
expense incurred in selling the home that appear on your settlement
statement. Add any other additional fix-up expenses you incurred in
preparation for sale to the sale expenses.
The adjusted cost basis
of property is
usually the original cost of the property adjusted for various items after you
acquired it.
Adjusted basis includes:
- including
sales tax, purchase expenses, commissions, etc.
- permanent
home improvements
- nondeductible
assessments for improvements (sidewalks, utilities, etc.)
- depreciation
claimed or allowable (if you had an office in your home or rented the
home)
- casualty and
theft losses deducted
If part of the home loan was forgiven by the lender after 2006
and before 2017 and you chose to exclude this income from gross income (you
filed Form 982), you must reduce your adjusted cost basis by the amount
forgiven.
For example, you purchased your main home for $500,000. The lender restructured
or refinanced your loan and forgave $200,000 of the loan. The adjusted cost
basis is now $300,000 if you retained ownership of your home after the
restructuring/refinancing.
Cost Basis of Inherited Property
If you inherited a home, the cost basis will depend on when you inherited it
and the choices made by the executor of the estate. Special rules for property
inherited and sold during 2010 may affect the cost basis.
If you inherited and sold a home in 2010, read the for Sale of Home and
Publication 4895 and talk to the estate executor about decisions he or she made
regarding the investment.
For more details, including a more complete list of additions and deductions to
your basis,
IRS Publication
523, Selling Your Home.
