Today TaxMama has been fighting the good fight for the rights of homeowners who filed for the homebuyers credit. The latest issue? When a married person files a separate tax return, how much is half the homebuyer’s credit? Is it based on half the purchase price of the house? Or half of $8,000? (or $6,500, or $7,500, depending on the credit.)
Here’s the story:
Our client was married. As much as she may have loved her husband, he wasn’t terrific with finances. So she kept her funds and tax returns separate from his. (Smart woman!) When she bought a new home in 2009, she bought it in her own name.
Without question, she qualified for the first time homebuyer’s credit. When you’re married, filing a separate tax return, your homebuyer’s credit is limited to half of $8,000. That means she could get no more than $4,000.
The cost of the home was quite low – let’s say $35,000. 10% of $35,000 is only $3,500. That sounds like it’s below $4,000 to me. How about you?
Of course, the IRS managed to make us fight for it, so it took a very long time to get her credit approved. When she got the approval letter and the check, it was for only half the $3,500 – or $1,750. That was a surprise.
We filed an appeal, and included a copy of each of the Tax Acts relevant to the definition of the homebuyer’s credit, highlighting the relevant passages. IRS made their decision last month, in May. The Appeals Officer agreed with the IRS clerk who processed the original check. She said essentially, yup – the woman is married, so she only gets a credit for half the purchase price. Case closed. Good bye. Get on with your life.
During a friendly chat last week (within 30 days of the Appeals decision), we clarified several points with the Appeals Officer.
1) The woman bought the house herself, with her own funds, and in her own name.
2) She is living in the home and qualifies for the credit.
3) The husband is not on title and not on the loan.
4) Even if he were, when multiple buyers buy a home, any ONE of them is entitled to the full credit, as long as no one claims more than $8,000. Therefore, she is entitled to claim the credit on the full value of the house – up to the MFS limit.
5) The MFS limit is $4,000. The $3,750 she claimed less than $4,000. She is entitled to the other half of her credit.
The Appeals Officer called yesterday. After discussing it with her boss and doing some research, they decided the interpretation of the law is – half the credit is $4,000 – not half the purchase price. The check is (will be) in the mail!
See, it pays to do your research. And it pays to be stubborn – when you know the law is on your side!
And remember, you can find answers to all kinds of questions about homebuyer’s credits and other tax issues, free. Where? Where else? At www.TaxMama.com.[Note: If you were subscribed to the e-mailed TaxQuips, you’d be getting other exciting news and tips by e-mail, that never appear on the site. Please click on the join TaxMama.com link – it’s free!]
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