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William Perez

Homebuyer Credit and Married Couples

By December 1, 2009

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One source of confusion in the homebuyer tax credit is over how married couples are treated. I've received lots of emails about this particular point, including this question from Nick,

"I was recently married in May 2009. I have never owned a home. My wife has owned a home within the past three years. Can I still qualify for the tax credit if I buy the house myself?"

Initially, the homebuyer credit was designed for "first-time" homebuyers. Recently, Congress revised this tax credit as part of the Worker, Homeownership & Business Assistance Act of 2009 to extend the tax credit to "long-term residents" who buy another primary residence. So we'll address two separate questions: (1) whether you would qualify as a "first-time homebuyer," and (2) whether you would qualify as a "long-term resident homebuyer."

A first-time homebuyer is someone who has not owned a primary residence in the three-year period ending on the date of purchasing the home. Married couples are considered first-time buyers if neither spouse has owned a residence in the previous three years. This second part of the definition has caused quite a bit of confusion. The relevant portion of the tax law is Section 36(c)(1) of the Internal Revenue Code which reads:

"The term 'first-time homebuyer' means any individual if such individual (and if married, such individual's spouse) had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which this section applies."

Nick mentioned that his wife has owned property in the last three years. If that property was the wife's primary residence, then neither Nick nor his wife would qualify as "first-time" homebuyers. The determination of whether you qualify for the credit is made on the date of purchase. So if Nick had purchased the home before he got married, he would qualify for the credit. (Source: First-Time Homebuyer Credit: Scenarios #1 and #4, IRS.gov).

However it might be possible for Nick and his wife to qualify as "long-term resident homebuyers." To be considered a long-term resident, the individual needs to have owned and lived in their residence for at least five consecutive years in the eight-year period that ends on the purchase date of the new property. If the taxpayers are married, then this definition applies to both of them, even if only one buys the property, just like with the definition of a "first-time" buyer. If Nick's wife has owned and lived in her property for at least five years, then they would qualify for a tax credit worth up to $6,500.

One final possibility: Nick mentioned only that his wife "owned a home." He didn't say whether this was her primary home. If the house was an investment property, or a rental, or a vacation home, it is possible that both Nick and his wife might qualify as first-time homebuyers.

The term "first-time homebuyer" means any individual if such individual (and if married, such individual's spouse) had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which this previoussectionnext applies.

Comments
January 26, 2010 at 10:18 am
(1) Julie says:

Thanks for explaining that! I have a similar scenario, where I owned a home for 4 yrs as a primary residence. I married my husband in Sept 2009 and we had settlement in Nov 2009 on a new home. He has never owned a home. We were hoping he would qualify for the credit, but according to your explanation since we were married before settlement he doesn’t qualify since I don’t qualify. And I don’t qualify for the long term b/c I wasn’t in my home for 5yrs – just 1 year short! Oh well…

March 26, 2010 at 5:30 pm
(2) M.Hewitt says:

http://www.irs.gov/newsroom/article/0,,id=202222,00.html

please take a look at the above link from the IRS website – If I am reading your second to last paragraph correctly, this is not what the IRS is saying. Both taxpayers, if married, must haved lived in the SAME principal residence for 5 of the 8 years to qualify for the LT resident credit.

any thoughts on this?

April 23, 2010 at 1:41 pm
(3) Married Tax Payer says:

The last scenario is wrong. The currently married couple must have lived in the SAME principle residence for 5 out of the last 8 years. As you described it, they would not qualify for either credit.

September 30, 2010 at 5:05 pm
(4) LISA says:

MY HUSBAN AND I LIVED OVER 10 YEARS FOR LONG TIME RES BUT WE REFINCED AND IT WAS PUT IT ON HIS NAME TITLE DEED AND LOAN IM NOT OWNER OF THE OLD HOME DO WE STILL QUILFIED WE JUST BOUT A OHOME JUNE 1 2010
THE OLD HOME FORCLOSED

September 30, 2010 at 6:21 pm
(5) William Perez says:

Lisa, the homebuyer credit is available for homes purchased after April 9, 2008, and before May 1, 2010, with the sale closing escrow on or before September 30, 2010. If you or your husband is a qualified servicemember , you have until before May 1, 2011, to purchase a home and still qualify for the credit. Since you bought your home on June 1, 2010, you won’t qualify for the tax credit unless one of you is a servicemember. A qualified servicemember includes “Members of the uniformed services, members of the Foreign Service and employees of the intelligence community … who serves on qualified official extended duty service outside of the United States for at least 90 days during the period beginning after Dec. 31, 2008, and ending before May 1, 2010.”

January 3, 2011 at 4:51 pm
(6) sm says:

I owned my own home for 10 years and qualified for the long term resident tax credit. But, since I remarried in 2004 and my new husband did not live with me in the primary home for the required amount of time, I was denied the long term resident tax credit. Is that right? I was penalized for getting married!!

January 3, 2011 at 10:28 pm
(7) William Perez says:

That’s correct. Both spouses must have qualified for the credit, not just one or the other.

March 15, 2011 at 5:13 pm
(8) mike m says:

I’ve seen several scenarios discussed but none that are exactly the same as mine, but from the looks of it I’m really afraid that I’m about to get shafted by our government. Here are the facts of our situation:

- married August 2010
- I bought our home May 2010, before we were married
- I have owned and lived in my last residence for 5 years
- she has never owned

I was counting on the 6500 credit when I bought the house, but because she hasn’t owned before are we getting shafted out of either credit??

March 15, 2011 at 9:33 pm
(9) William Perez says:

Mike, the homebuyer credit ended in April 2010. If you have a signed purchase contract dated before April 30, 2010, and you closed escrow by Sept 30th, 2010, then you would likely qualify for the tax credit, and would qualify for the credit based solely on your qualifying factors since you were not married at the time. If your purchase contract is dated after April 30th, however, you would qualify for the credit only if you are a member of the American military, intelligence community or Foreign Service.

May 17, 2011 at 2:38 pm
(10) emily says:

My husband bought his home in 2003 and I moved in in 2005. We married in 2007. I was not on the deed to this house. we sold my husbands house in 2010 and he bought our current house in april 2010. The irs is telling us that we do not qualify for the long term residence credit of $6500 because wev are married, file jointly, and I did not own either of our homes. Is this true? The irs said that my husband would have qualified for the credit if we were dating and not married.

May 24, 2011 at 11:27 pm
(11) JM says:

I purchased my primary residence in 2003. I met my wife in 2004 and she moved into the house in 2005. We were married in 2007. We lived in this house for over 5 years until 2010 when we bought a new home. We applied for the long term resident credit and we were denied by the IRS because “we did not both own” the first house. According to your comments we should qualify – can you provide some clarity?

Also, do we have an argument because NJ where we live is a marital property state so when we got married the house became both of ours even though it was not titled as such?

Thank you.

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