Category Archives: First-Time Home Buyers

Last week, we asked visitors and readers to submit their story if they have fallen victim to the unintentional “Marriage Penalty” in the Home Buyer Tax Credit.  We got a number of comments and emails, which we’ll re-print below, but we hope that anyone who follows this issue and is affected would contact us so we can continue to put a human face on the issue.

First, from Anthony, in the Questions section:

We just put in an offer yesterday and it was accepted. But after reading your article I am slightly concerned about our eligibility for the tax credit.

My wife and I have been married for 10 years. In August 2003 (so 6+ years ago) we purchased a 2 family residence and have been living there ever since – renting out the other side.

When we were looking to buy, we already had one child so my wife was not working. I was the sole income. When we went to apply for the loan, the bank said my credit and salary were good enough to not need my wife on the application. He said it wouldn’t be an issue. So the application went through with just my name, but we had BOTH our names on all the contracts and documents. When we got to the closing everyone started panicing because they said that could not be done – my wife could not be on the contract and documents because the loan was in my name only. They said it wasn’t that big a deal so they just crossed out her name.

So – for the entire time we have been living in this house, it has been in my name. I always assumed she was still co-owner of it, but now I am nervous that when we apply for the 6500 tax credit on the new house, the IRS would consider her a “new” homeowner and me a “long time” homeowner so we lose.

Do you think that will be the case? Or is she automatically an owner because we were married for 4+ years already when we bought it?

Anthony was the first to raise what we’re calling the “fourth” type of marriage penalty: situations where a married couple has lived in a home owned by one of the spouses for at least five consecutive years out of the last eight, but who might not be eligible because both spouses did not have ownership.  We’re still looking into the issue of eligibility, and we’ll provide an update as soon as we know.
Continue reading →

Today, we published an op-ed in the Journal News, the local paper in the Hudson Valley area of New York, calling for an end to the “Marriage Penalty” in the Home buyer Tax Credit. We have actually already asked local members of Congress to look into the issue, and the feedback we’re getting is that they see the problem and are trying to figure out how to solve it.

We have some background on the issue here, and a video that discusses how the Home Buyer Tax Credit impacts married couples versus unmarried couples here.

What can you do to help?  Our contacts in the government say that it would help enormously if we could put a human face on the issue, to find a married couple who is in the process of looking to buy a home, but who is discouraged because they will not be able to claim the Home Buyer Tax Credit because of the Marriage Penalty.

If you’re in that position, or you know someone who is, either post your story here or email us.

And if you want to join our Facebook cause to end the Marriage Penalty, then go here.

The Problem

The basic problem is this: the Home Buyer Tax Credit is designed to incentivize home purchases this year, and it should have a significant impact. With the increased income levels, Goldman Sachs estimates that virtually all first-time home buyers and up to 70% of long-time homeowners would be eligible to get a tax credit.

But the impact is going to be undermined because thousands of married couples will not be eligible due to a very restrictive reading of the legislation by the IRS. Why?  Because the IRS will only allow married couples to claim the credit if both spouses qualify for the same type of credit in their own right, even if the couple would get a tax credit if they were unmarried. Married couples are tested together, and must both be eligible. This is not the case for unmarried couples, who are tested individually such that if one does not qualify, the other can still get a credit. Continue reading →