So why has the “marriage penalty” become an issue in the last month? After all, the home buyer tax credit goes back to 2008, and the IRS has always required that both spouses be eligible in order for the couple to claim the tax credit.
We started to wonder about that this week, when someone asked why we had not raised it before. The answer is simple: the most egregious applications of the “marriage penalty” come from the long-time homeowner tax credit, which did not exist until early November. Here’s why.
When the home buyer tax credit only applied to first-time home buyers, and the IRS required that both spouses qualify as first-time home buyers, it seemed unfair but not inconsistent with general IRS requirements involving spouses. The IRS tends to treat married couples as a joined entity (which makes sense), so it was not unusual for the tax code to require both spouses to be eligible in order for the couple to claim the tax credit. Now, that might still be unfair, especially since unmarried couples can claim a tax credit even where one partner is ineligible, but it did not raise any real complaint prior to November 2009. Continue reading
