As part of our general campaign to end the Marriage Penalty in the Home Buyer Tax Credit, we were interviewed last week by a reporter from the National Journal about the issue. He wrote up an extensive piece about the issue, which unfortunately was unfortunately behind a subscriber wall when it initially came out. But it’s live now, and you can read it here:
In fact, we’ve seen a bit of a spike in the traffic on the site this week, and a spike in the Questions section from people asking about the Marriage Penalty, so we think that a lot of people are just discovering the problem.
The funny part about it is that the reporter only discovered the issue when he was getting ready to file his taxes, and realized that he was not able to claim the credit because of the marriage penalty. I guess what we need now is for someone related to an important Senator to discover the same thing….
But given the new surge of questions on the Questions section of the blog, we didn’t clear enough up. The new question of the week is this: if the IRS will “impute” ownership of the main home from the titled spouse to the untitled spouse, to allow both spouses to qualify as “long-time homeowners”, what happens if the couple wasn’t actually married during the entire time that they lived in the home?
That is, let’s say that we have a couple Harry and Wendy. Wendy bought a home for herself in 2000, met Harry in 2001, Harry moved in with Wendy in 2003, and they’ve lived together in that home since 2003. If they got married that year, the IRS has now confirmed that they would be eligible for the tax credit even though Harry would not be on the title and not technically a “home owner,” because his wife’s ownership would be imputed to him. Conversely, if they were never got married, they’d be eligible for a Home Buyer Tax Credit (she’d be eligible as a long-time homeowner, he’d be eligible as a first-time home buyer).
But let’s say that after all those years together, they made it official last year, and got married summer 2009. Uh oh. Are they still eligible? Literally speaking, they would not be, because she qualifies for one type of credit and he qualifies for another type of credit, which is the classic Home Buyer Tax Credit Marriage Penalty problem. But now the question becomes whether that “imputed ownership” issue will allow Harry to qualify as a long-time homeowner because (1) he lived in the house for all those years, and (2) he is now married to the person who owned it all that time.
We don’t know the answer to this question, but we’ll try to find out. On the one hand, the IRS has interpreted all these Home Buyer Tax Credit requirements very literally. On the other hand, it does not seem like the IRS cares so much about the length of marriage, but simply about whether you’re married right now or not. So it’s up in the air. We’ll try to find out.
We finally got confirmation from the IRS about the Fourth Type of marriage penalty that we’ve discussed on this blog. I just had a conversation with a Mr. Schriber from the IRS, ID #0571682, who has confirmed for me the following: if a married couple has lived in a home for five consecutive years out of the last eight, but only one spouse is on the title to the home, the untitled spouse qualifies as an “owner” for purposes of satisfying the ownership history requirements of the long-time homeowner home buyer tax credit.
This is very good news. We’ve gotten probably a dozen questions on the Questions section of the blog from people who are in this situation, which makes sense given how likely it is that a couple would get married after one spouse already owns a home, and then live in that home for a long period of time. Although the legislation literally requires both spouses to be owners of the property, the IRS imputes ownership from one spouse to the other, which is something we speculated about when we initially discussed this issue.
We will be updating the various blog posts about this issue, and trying to find all the questions about this issue so we can let people know the good news. That said, nothing about this changes the other three types of Marriage Penalties, which prevent a married couple from qualifying for the tax credit if one spouse is ineligible, if the spouses are eligible for different types of credits, or where both spouses are long-time homeowners but for different residences. To change that, we’re going to need Congress to pass the legislation drafted by Congressman Engel.
My thanks to Mr. Schriber for clarifying this issue for us.
Okay, so this is now the home stretch — 30 days left to get into contract to claim the Home Buyer Tax Credit. If you’ve not already done so, you should take our Eligibility Test to see if you qualify for the credit.
And if you do qualify, and want to claim the credit, you need to make home buying a priority in the next month. We would be shocked if the tax credit were extended again, so don’t sit back and hope for a “snow day.”
Make sure the agent knows you need to be in contract by April 30th, so your agent knows your priorities.
Contact a mortgage person and get prequalified for a loan amount.
If you’re in an attorney state, call an attorney and hire one TODAY. Don’t wait until you found your dream house, get your attorney on call for you so that when the seller prepares a contract, your attorney can turn it around in 24 hours.
Clear your weekends — you’re going to be visiting open houses and going out with your agent and doing all real estate stuff this month.
Can you get into contract from a standing start in one month? Yes, absolutely. Every agent I know has a story about someone who went from “hey, honey, let’s go look at some open houses today, as a lark” to “where do I sign” within two weeks. So it’s not too late. But home buying has to be your priority for the next month.
We get a number of inquiries on our Questions section about the income limitations in the Home Buyer Tax Credit. People are still a little confused about the “new” income limitations, even though they now go back over four months. To help people through it, we put together a video about the income limitations and how they apply, something that might be helpful as people are getting ready to file their tax returns in a few weeks.
As you can see on our countdown on HomeBuyerTaxCredit.com, we have only 50 days left for buyers to get into contract and claim the Home Buyer Tax Credit for their purchase. That’s still a lot of time, even enough for people who haven’t started looking yet, but remember that it does take time to get through the contract process even after you find the home you want to buy.
Our new video — Seven Ways to Make Sure You Meet Your Home Buyer Tax Credit Deadlines — gives you some guidance on how to ensure that you don’t miss the April 30 deadline. Here are the highlights:
The Deadlines
As you might know, the Home Buyer Tax Credit has two principal deadlines:
· You have to be in contract by April 30th, 2010; and
· You have to be closed by June 30th, 2010.
These are hard deadlines. It’s not like high school when you can go to your teacher and ask for an extension because you were sick over the weekend. The government is not likely to issue another extension of the tax credit, and the IRS has been extremely strict about enforcing the deadlines.
Remember that getting into contract on a home can take a lot of time, that you have to get all these things done:
· Find the right real estate agent.
· Find the right mortgage officer
· Get pre-qualified for a loan amount.
· Look at lots of homes online.
· Look at lots of homes in person.
· Find the right home, and make an offer.
· Negotiate the price and terms.
· Arrange and hold an inspection.
· Deal with the inspection results.
· Hire an attorney to review contracts, if you are in an attorney state
· Review contracts with attorney, sign and return.
And then even if you’re in contract by April 30th, you’re not home free, because you still have to be closed by June 30th, which gives you only 60 more days to get through the title and financing process. And those can take a while.
Moreover, I fully expect that as we get closer to these deadlines, we’re going to see business activity explode. If you wait too long, you might have trouble scheduling an inspection when the inspectors are being hammered with urgent calls from people in the same position. A lot of people are going to be scrambling to get into contract in the last two weeks of April, and closed in the last two weeks of June. Try not to be part of that mob.
So here are 7 Tips for Meeting Your Home Buyer Tax Credit Deadline:
For those of you who follow the blog and our site and who are in web development or marketing, we thought we’d share our experience building this site for the past two months, particularly our conclusion that Bing has clearly set itself out as a superior search engine to Google. Here’s why.
We launched HomeBuyerTaxCredit.com in mid-January as what we still believe is the best Home Buyer Tax Credit resource available anywhere in the country. If you go to the national franchise sites, you’ll find information that is out of date or inaccurate. For example, we just checked out a particular “yellow” company’s website, one that has been advertising extensively online to attract tax credit buyers, and found that they’re still saying that the $6,500 credit is “for qualified buyers who currently own a home.” That simply not correct. To claim the $6,500 credit, you do NOT have to currently own a home, you just have to be someone who owned one for five consecutive years out of the last eight. That’s not a small mistake, particularly since the purpose of the “5 year out of 8″ requirement was specifically to allow people who do NOT own right now to get the long-time homeowner credit (i.e., people forced to sell because of the economy). And it’s not a typo, since the misinformation continues in the bullet points, when the yellow company says “Current homeowners are eligible for a $6,500 tax credit, provided you have lived in the home you are selling as a principal residence for five consecutive years within the last eight years.”
That stuff drives us nuts, a national company making two significant mistakes about the tax credit in the span of about one page of material, particularly since it’s clear from the page that they haven’t even updated it since November. And they’re not the only one. A lot of national sites make the same mistake, and moreover their tax credit information was clearly written in November (i.e., lots of references to “The government just passed….” something that’s been in play now for four months).
