Form 5405

[rwm221]

I have a client who in 2008 got the first time home buyer credit. The house and the first time home buyer credit was in her husbands name. In 2020 they got divorced and she ended up with the house. The house was put in her name but the home buyer credit was not. Her ex husband is not going to pay the credit. Since the house is in her name but not the credit how does she pay the credit? Could she loose her house if it is not paid?

Thank you

[Lion]

That was long enough ago that I don't remember the specifics. You'll have to do some research. What I do remember is that the 2008 credit was $7500 to be repaid. Was it $500/year? And, does the credit/repayment obligation stay with the house? Or, divide between the two former spouses? Was this addressed in their divorce decree?

[TaxGuyBill]

Husband needs to file Form 5405 with Line 3e checked.

Client needs to file 5405 to make the repayment (actually, I don't remember if Form 5405 required to make the payment, now that I think about it, it might not be required unless other situations apply).

[Rapid Robert]

The house and the first time home buyer credit was in her husbands name. In 2020 they got divorced and she ended up with the house. The house was put in her name but the home buyer credit was not. Her ex husband is not going to pay the credit. Could she loose her house if it is not paid?

First, no she won't "lose the house", at worst the IRS would pursue routine collection of unpaid tax liability. I suppose it could eventually get to the point of a lien against the house, but still she would not "lose" it.

Second, it's amazing how much the instructions for Form 5405 answer your questions. One key is, did they file a joint return in 2008? You don't say whether or not they were married at that time.

If not specifically addressed in the divorce decree, and if the divorce was hostile, she could take a chance on the husband not doing what was suggested in post #3. In that case husband would probably get a bill from the IRS. Worst case, she would eventually have to pay the $500 plus interest. Not saying this is my recommendation, but I'm sure worse games have been played with taxes between adversarial divorced couples.