Questioning my first time home buyer status.

I am a first time home buyer and I am purchasing a home. I started the process with the intent of qualifying for the federal Tax credit. The process dragged out and in the meantime I got married to a woman who owned her home. I have no rights to the home nor do I want them- they are her assets she came into the marriage with. I was married in late July of this year and I close on the house tomorrow. I AM the ONLY person on the note and mortgage my new wife will NOT be on the mortgage. WE plan on keeping our finances separate. Will I still be eligible for the 8000 credit?

No, you won't qualify for the credit. Internal Revenue Code (IRC) section 36(c)(1) defines first-time homeowner for the credit as follows: “(1) First-time homebuyer.--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.”

According to your post, you are married as of July 2009. You are closing on the home tomorrow (10/27/09), which is the date of purchase of the home, and your wife has owned a principal residence sometime in the three preceding years (i.e. 10/27/2006 - 10/27/2009). As a result, under the statute, you do not meet the definition of “first-time homebuyer” and can't claim the credit. It does not matter under the IRC provisions for the credit that you are the only person on the deed, the only person on the note, or that that you plan to keep your finances “separate.”

thank you for the information? since my marriage is so brief would an annulment work in my favor to be able to qualify?

Annulments aren't given out because of the length of the marriage; usually, one has to prove a spouse didn't have the (mental) capacity to enter into a marriage or is already married.

Thank you for the information.  I know this is hindsight but now I am curious, if I would have gotten Married (to the same individual who owned a home) at any point during the three year period after the closing, would I then need to return the credit to federal govt?  or is the line in the sand drawn at the day of closing and I could get married the day afterwards? I appreciate the information.  

Had you bought the home first and gotten married the next day you would have qualified.

Now there is a long shot --if under the laws of your state as to property if you acquired equitable title or constructive title to the property at an earlier date due to nature of your purchase agreement , prior to you rmarriage the earlier date may count --but thats uncommon as to many "ordinary" RE deals. 

(For example in my state long terms leases and perhaps options  are deemed to be constructive transfers if its 30+ years)

Its even possible that had you done a paper deal earlier but finished it later , the earlier date could count.

But unless you can get either to count you are sort of out of luck.

Drew:

Had you bought the home first and gotten married the next day you would have qualified.

Actually, that's not all that clear. Given the way federal tax law is constructed, it may well be that so long as he was married by the end of the year, his spouse's ownership of a personal residence within 3 years of the date of purchase of the home would be sufficient to deny him the credit. Since that is not his situation, I won't go into an explanation of why that might be the case. Had he waited until January, though, he'd have been fine.

Drew:

Now there is a long shot --if under the laws of your state as to property if you acquired equitable title or constructive title to the property at an earlier date due to nature of your purchase agreement , prior to you rmarriage the earlier date may count --but thats uncommon as to many "ordinary" RE deals. (For example in my state long terms leases and perhaps options are deemed to be constructive transfers if its 30+ years) Its even possible that had you done a paper deal earlier but finished it later , the earlier date could count.

No. Under guidance issued by the IRS and Treasury, for the purposes of the credit it is generally the date on which the taxpayer closes that is considered the date of purchase. The main exception is where the taxpayer has a home constructed on the property, in which case the date of purchase is considered the date they occupy the home.

An annulment might work, especially if you got it done before the end of the year. If you get an annulment now and simply re-marry the same person next year, however, there is an issue of whether the annulment was bona fide, or just a sham to get a tax benefit. The IRS and the courts will almost certainly deny the credit if the annulment is viewed as a sham, and penalties may apply. See a tax lawyer about this to review the details of your situation before trying to seek an annulment. That assumes that you'd qualify for an annulment under the laws of the state in which you married. You might not.

questioning home decision:

I know this is hindsight but now I am curious, if I would have gotten Married (to the same individual who owned a home) at any point during the three year period after the closing, would I then need to return the credit to federal govt? or is the line in the sand drawn at the day of closing and I could get married the day afterwards? I appreciate the information.

As I indicated in another reply in this thread, had you bought the home today and waited to get married until next year, you'd have been fine. Thus, you could have taken the credit in that situation and would not have to repay it once you got married.

However, it is much less clear what the result would be if you bought the today and got married tomorrow. In general, whether you are married for tax purposes depends on whether you are married on the last day of the year, i.e. December 31. Thus, if you bought the home today (10/26/2009) and got married any time between tomorrow (10/27/2009) and the end of the year (and stayed married as of December 31, 2009), the IRS may take the view that you don't get the credit because you were married that year for tax purposes and she owned a principal residence sometime within 3 years of the date of purchase (i.e. 10/26/2006 - 10/26/2009). So, whether the correct test is whether you were married as of the date of purchase or as of the end of the year is not yet clear. But for you, unless you divorce or get an annulment before the end of the year, that debate is academic because either way you'd not get the credit. And, even if getting a divorce or annulment might help (you'd want an opinion on that from your own tax lawyer), as I indicated before, if the divorce or annulment is a sham just to get a tax benefit, you'll almost certainly lose. So, getting the divorce or annulment now simply to remarry the same person next year is not likely to be effective.

I was at a continuing education seminar (NATP sponsored) this past friday and the following scenario was addressed.

Man purchased a house in March of 2009, and amended his 2008 tax return to take the credit.  He later married in November.  He was fine to take the credit on his 2008 return, but could not have done so on his 2009 return.  According to the speaker, they had verified that particular scenario with the IRS.

Another scenario that they gave us was a man owned a home prior to marriage.  He married and they divorced several years later.  As long as they were not in a community property state and as long as she was never on the deed to the home, she would be eligible for the credit if she chose to buy a home after the divorce.  They stated that this scenario had been verified with the IRS as well.

LdiJ:

Man purchased a house in March of 2009, and amended his 2008 tax return to take the credit. He later married in November. He was fine to take the credit on his 2008 return, but could not have done so on his 2009 return. According to the speaker, they had verified that particular scenario with the IRS.

I'm always a bit nervous about verbal advice from the IRS, even if it came from Chief Counsel (which are the folks you really need to ask because they write the regs and litigate the cases) because verbal advice is not binding on the Service and the answer may well depend on whom you ask. Given the wording of the statute, however, this would work since he married AFTER he bought the property and he elected to take the credit in 2008. Thus, he was neither married at the time of the purchase nor married for the purposes of his 2008 return. It's a lot harder case for the credit, given the wording of the statute, if, as the poster did, the taxpayer marries BEFORE the purchase and then elects to carry it back to 2008 because in that case he is married at the time of the purchase, which would seem to kick him out of the definition of "first-time homebuyer."

LdiJ:

Another scenario that they gave us was a man owned a home prior to marriage. He married and they divorced several years later. As long as they were not in a community property state and as long as she was never on the deed to the home, she would be eligible for the credit if she chose to buy a home after the divorce. They stated that this scenario had been verified with the IRS as well.

That, too, fits comfortably within the way the statute is written, and also matches some written advice I recall seeing from the IRS. I'd have reached that same conclusion.