Category Archives: Buying Our First Home

Update: Divorce is final! What happened with the First Time Home Buyer Tax Credit:

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My divorce was finally official this week.  We both agreed to have my husband (spouse) keep the home.  I have not signed my interest in the home over yet (waiting on my lawyer).  In the divorce decree it states that I transfer all interest and rights to the home to my ex-husband.  It also says specifically that he will assume all responsibility for the IRS First Time Home Buyer Credit repayment.

According to the IRS, he will not have to pay that money back to the IRS unless he moves or sells the home.  Then he will have to pay the full $8,000 back.

I want to give some advice regarding divorce and the First Time Homebuyer Tax Credit.  If you are thinking of divorce, it is best for both of you to stay in the home until the divorce is final or you have transfered your rights and interest to the home over to your spouse.  Lucky for me, we were able to get the divorce done fairly quickly before the IRS came after me for having moved out of the house.  I do not know what triggers them to act on that or how long it takes them to demand the money, but if they did… it would have made things extremely complicated.  I do wish that I had stayed in the home because it really worried me. 

It also caused me to wait until the last minute to file our 2010 taxes.  I still have not filed because I have not transfered my interest to him yet.  I can’t remember what it’s called… maybe a Quitclaim Deed?  I have been too scared to file my taxes because of my new address and I am not trying to do anything to alert them of the move before he has full legal posession of the house.  I also want to send in a copy of the divorce and transfer documents with the tax return to avoid any issues in getting my 2010 refund.

A reader shared this link on one of my previous posts.  I found it to be extremely helpful.  It is the IRS rules and guidelines for divorce and repayment of the First Time Home Buyer Credit and also how moving or selling the house affects repayment.

http://www.irs.gov/newsroom/article/0,,id=206293,00.html

Hope this helps!  And remember, share your experiences with this too.  I’m sure others would find it very helpfull.

Divorce and repayment of First Time Home Buyer Tax Credit

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I recently had to do some digging on divorce and how that effects repayment of the First Time Home Buyer Tax Credit.  I didn’t find a whole lot of information about my specific situation so I wanted to share it here with you.

My soon to be ex-husband bought our first home this past April.  Only his name is on the mortgage, but we both got the full credit ($4,000 each for a total of $8,000).  We are now getting a divorce and I wasnt sure if I would have to pay my half of the credit back. 

After some research, I did find out that yes… whoever moves out of the home has to repay their portion (half) of the first time homebuyer tax credit.  However, I also found out that if I legally transfer my rights to the home to my ex within the divorce decree, then that transfers full responsibillity of the tax credit to my ex.  Meaning that he becomes responsible for repayment of the full $8k should he move out of the home, sell, or foreclose.  As long as I legally transfer all my rights regarding the property to my ex-husband, then I am off the hook.  But it has to be legal and included in the divorce decree.

I figured there is probably someone out there in the same awful situation and could use some advice.  I obtained that information from the IRS and also my divorce lawyer.

Update on our First Time Home Buyer Tax Credit and our Injured Spouse application.

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Hello everyone and sorry it took me so long to write an update regarding our First Time Homebuyer Tax Credit.  After much struggle with the IRS and speaking with a lot of IRS employees that clearly did not know what they were talking about, I finally broke down and got the Tax Payer Advocate involved.  The final straw was when they asked me to resend documents for a FOURTH time!  The Taxpayer Advocacy is an entity that is supposed to ensure that the IRS is handling things appropriately.

Our assigned advocate could see that I was clearly led around in circles and that processing times were not acceptable.  After getting the Taxpayer Advocate involved, it only took about 2 weeks for her to push the IRS to a completion date.  We finally ended up getting our tax refund (including the First Time Home Buyer Tax Credit) in September.  So it took them 5 months to process everything.  Had I not been on them the whole way catching mistakes myself, it would have taken much longer.

I want to let you all know that we did apply for the Injured Spouse application as well.  Even though one of us owed previous tax debt, the injured spouse application protected our first time homebuyer credit from being applied to that back tax.  There are no rules pertaining to the allocation of the first time home buyer credit so by filing the injured spouse form, you can allocate the full $8,000 to the spouse that does not owe the back taxes.  Suprisingly, we DID get the full amount.

Hope this information helps!