Today, we received further confirmation and clarification from the IRS that the Marriage Penalty in the Home Buyer Tax Credit will not prevent a married couple from claiming the credit in cases where one spouse is on title, but the other spouse is not. As you might remember, we were concerned that the IRS would literally read the language of the tax credit legislation to require that both spouses trying to claim the long-time homeowner tax credit had to be actual owners (i.e., on the title) for the couple to be eligible for the credit. We spoke to an IRS representative last week about that issue, and he stated (as we had hoped) that ownership would be imputed from the titled spouse to the un-titled spouse, and that a married couple who had lived in the home that one of the spouses owned for at least five consecutive years out of the last eight (and otherwise qualified for the tax credit) would be eligible.
I got further confirmation on that issue today from a Ms. Burchette, ID # 0246491 of the IRS hotline, who actually indicated that the IRS has released an internal advisory (probably in response to our raising of this issue last week) stating the following: “A married couple are both considered owners of the home even if only one spouse is a titled owner when both have been residing in it.” So although that advisory has not been published, the IRS is using it internally, confirming the information we put out last week.
But the reason I was on the phone today with the IRS was that we had a new series of related questions come up that in our Questions section, from multiple readers who were concerned about what happens if the couple has lived in the home for a long time together, and one of them is on the title, but they were only recently married:
- From Matt: Wife and I moved into our current home 5 1/2 years ago (fall of 04)and has been our only principle residence in that time period. When we bought the house in 04 it was in my name only. We married in January of 2008 and refinanced adding my wife’s name to the title in December 2008. We have a sales contract currently in place and are closing in June. I would like to think we meet all the criteria as we have both lived in this house for five years, but would like your opinion.
- From Katie: My husband bought a house in 2003 before we were married. I had never purchased a home. I lived there for 5 years, 4 of which we were married before we bought a new house together in mid-Nov 2009. Does your recent clarification, mean that we specifically had to have been married for 5 years as well to qualify?
- From K: My husband and I have lived in the same home for five years. He is the sole owner of the home. Marraige according to the IRS imputes ownership to me. My question is: does the ownership imputed to me run from the date of purchase or the date of marriage? We lived together in the home for the first year while engaged.
In other words, will the IRS impute ownership to a non-title spouse where the spouse has lived in the home for at least five consecutive years out of the last eight that the other spouse owned, but where the couple was not married during that whole time? You could imagine a situation where the IRS will only “impute” ownership during the time that the couple was married, and bar married couples from claiming the credit where only one spouse was on title, and the couple was not BOTH married AND living in that home for the requisite five year period.
Fortunately, the answer seems to be that such couples will in fact be eligible for the Home Buyer Tax Credit. According to Ms. Burchette, the key fact is that they must have both lived in that home for five consecutive years. If they did that, and one of them owned the home, the IRS will consider the ownership to be imputed to the non-titled spouse so long as they are CURRENTLY married. They do NOT need to be married for the entire time of their ownership.
Obviously, this is good news. It’s become fairly common for couples to live together before they get married, and it’s not difficult to imagine situations where couples get married after one spouse has purchased a home that they both lived in. So we’re glad that the IRS is taking a common-sense approach to this issue.
