According to the IRS, he will not have to pay that money back to the IRS unless he moves or sells the home.  Then he will have to pay the full $8,000 back.

I want to give some advice regarding divorce and the First Time Homebuyer Tax Credit.  If you are thinking of divorce, it is best for both of you to stay in the home until the divorce is final or you have transfered your rights and interest to the home over to your spouse.  Lucky for me, we were able to get the divorce done fairly quickly before the IRS came after me for having moved out of the house.  I do not know what triggers them to act on that or how long it takes them to demand the money, but if they did… it would have made things extremely complicated.  I do wish that I had stayed in the home because it really worried me. 

It also caused me to wait until the last minute to file our 2010 taxes.  I still have not filed because I have not transfered my interest to him yet.  I can’t remember what it’s called… maybe a Quitclaim Deed?  I have been too scared to file my taxes because of my new address and I am not trying to do anything to alert them of the move before he has full legal posession of the house.  I also want to send in a copy of the divorce and transfer documents with the tax return to avoid any issues in getting my 2010 refund.

A reader shared this link on one of my previous posts.  I found it to be extremely helpful.  It is the IRS rules and guidelines for divorce and repayment of the First Time Home Buyer Credit and also how moving or selling the house affects repayment.

http://www.irs.gov/newsroom/article/0,,id=206293,00.html

Hope this helps!  And remember, share your experiences with this too.  I’m sure others would find it very helpfull.

My soon to be ex-husband bought our first home this past April.  Only his name is on the mortgage, but we both got the full credit ($4,000 each for a total of $8,000).  We are now getting a divorce and I wasnt sure if I would have to pay my half of the credit back. 

After some research, I did find out that yes… whoever moves out of the home has to repay their portion (half) of the first time homebuyer tax credit.  However, I also found out that if I legally transfer my rights to the home to my ex within the divorce decree, then that transfers full responsibillity of the tax credit to my ex.  Meaning that he becomes responsible for repayment of the full $8k should he move out of the home, sell, or foreclose.  As long as I legally transfer all my rights regarding the property to my ex-husband, then I am off the hook.  But it has to be legal and included in the divorce decree.

I figured there is probably someone out there in the same awful situation and could use some advice.  I obtained that information from the IRS and also my divorce lawyer.

Our assigned advocate could see that I was clearly led around in circles and that processing times were not acceptable.  After getting the Taxpayer Advocate involved, it only took about 2 weeks for her to push the IRS to a completion date.  We finally ended up getting our tax refund (including the First Time Home Buyer Tax Credit) in September.  So it took them 5 months to process everything.  Had I not been on them the whole way catching mistakes myself, it would have taken much longer.

I want to let you all know that we did apply for the Injured Spouse application as well.  Even though one of us owed previous tax debt, the injured spouse application protected our first time homebuyer credit from being applied to that back tax.  There are no rules pertaining to the allocation of the first time home buyer credit so by filing the injured spouse form, you can allocate the full $8,000 to the spouse that does not owe the back taxes.  Suprisingly, we DID get the full amount.

Hope this information helps!

My husband and I finally decided to break down and send in our tax return with the First Time Home Buyer Tax Credit, despite our concerns of possibly losing $4k because of my old tax debt.  We just really needed the money now, so much that $4k is better then waiting until next year for $8k.  Ugh.

I still had no 100% firm answer from the IRS on whether or not they would take half of the credit and apply it towards my back taxes.  But the general consensus was that we get to designate where the credit goes, not the IRS.  It’s hard to accept that the IRS would ever let you decide something like that when you owe them money.

So we filed our taxes by mail this month.  I sent it certified, which I recommend everyone do.  I have had times where the IRS would actually input a later date then when it was really delivered.  Thank goodness I had delivery confirmation.  I had to send that in to them and they updated my account.  If I hadn’t had that, it would have been seriously delayed in processing.  And trust me, if you are filing an injured spouse form, have an offer in compromise, or are applying for the First Time Homebuyer Credit, they will take their sweet time. 

Anyway, it was delivered 4/7/2010.  I called yesterday to see if there were any updates, but they told me it’s too soon for them to even see it.  I was told it would take something like 8 weeks to process.  I can almost gaurantee it will probably take longer because I have so much going on with it.  Which is really irritating.  I will keep you all posted though when I hear something.  I will be calling and checking in periodically.  Which I also recommend anyone in a similar situation do. 

Last year we filed the Injured Spouse form.  There were all kinds of issues.  A lot of back and forth, send this, send that, nonsense.  And I tell you, me calling and hounding them was way more productive then waiting for mail correspondence.  I would find out important things that had to be done by phone, then get the notice about it needing to be done in the mail, two weeks later.

Oh, and be SURE to include a copy of your HUD-1 settlement statement from your home purchase WITH your tax return AT THE TIME YOU MAIL IT.  I believe they initially didn’t require that before they revised the tax credit.  If you send it separate from your return, it could delay things.  And I also do not believe you can file electronically if applying for that credit. So be prepared, because filing by mail takes way longer then what you might be used to when filing electronically.

We have bought our home and are finally moved in.  So even though I have to deal with all this IRS nonsense… I couldn’t be happier!

 The tax debt I owed on was acquired prior to myself being married and was a very long time ago.  So my husband is considered an “injured spouse” in IRS terms and none of his refund is ever taken to pay my tax debts.  So we know with certainty that his income tax refund will go to him and not be used to pay my old tax debts even though we file jointly (we did this last year too).

My issue here is that my husband is buying our first house this year.  It’s going to be in his name only, not mine.  So he will be be getting the first time home buyer tax credit.  If he files taxes separate, he only gets $4k for the credit.  If he files jointly with me, then he gets the full $8k credit.  Which makes it seem like me being added to the taxes involves doubling the credit… which would make it seem like 50% of the credit is considered mine.  My concern is that the IRS will take that additional $4k (50%) as if it were my half and apply it to my old tax debt. 

We really need the money now.  Being that we have to borrow against it in order to get our house.  But at this point feel like if we file for it on our 2009 taxes that we are taking a huge risk of losing 50% of the credit to the IRS.  We can always wait until 2010 tax filing to claim the credit in full, but that will make things hard on us as we would have to come up with the money to pay back the loans for our purchase expenses. 

Does anyone out there have any firm information on this situation?  It would be greatly appreciated.

It’s been amazing to me to go into fairly modern housing developments with spacious single family homes, to see that the houses are in ruins.  These are homes that were not too long ago, gorgeous.  There, of course, is a difference between losing your job and not being able to afford the upkeep of a large home versus just being a lazy slob.  I can always tell where the lazy slobs live.  Those are the ones that can’t even bother to clean up the trash in their yard or control the weeds and have sheets for curtains. 

I’m sorry, but you have no business owning a home if you don’t have anough motivation and sense to at least take care of your investment.  Usually, I say “to each, his own”, but in this case, what you do effects everyone around you financially.  Unless you developed some medical condition and have bad circumstances, then there is no excuse.

I was in a Dominion housing development and passed by this home that had potential to be lovely.  The houses on each side were well kept.  This house, however, looked like the garage door was used as a shield in a war!  It had dents all over it and was hanging at an angle.  It clearly didn’t work anymore.  Through the open gap you could see piles of what looked like wall to wall garbage inside.  Outside wasn’t much better… trash and miscellanious crap strung about.  There were two young and healthy looking teenage boys out front playing around.  It made me think about my days growing up… if that were me, my parents would have made sure I had that all cleaned up immediately.   With two strong boys living there, why isn’t that place cleaned up?

I think it should be mandatory that if you are a homeowner you must abide by rules to keep your property clean and appealing.  I’m not saying it needs to be spotless or completely in tip top shape, but just that there should be rules about people turning homes into eye sores.  If you can’t take care of your home, then you have no business being a home owner.

Another thing that just kills me… is going into these foreclosure homes and seeing the condition people leave them in.  I went into a home that was at one time a $180,000 home.  It had close to 2,500 square feet and a very unique spanish style architecture inside with massive vaulted cielings and archways.  I walk in and all the carpet and flooring is gone.  Almost every wall is infected with mold, has holes, and dirt/scuff marks/stains.  The mold problem was really bad and freaked me out just going inside.  Many of the cabinets had been ripped out and the appliances were missing.  The outer garage door was gone and a massive piece of plywood blocked it off.  The home had been reduced to $95k, but my agent said there was no way the bank would ever get that much with it in that condition.

That was just one of the many destroyed homes I have seen recently.  Just completely neglected and mistreated by home owners that just don’t care.  Many of these people who lose their homes become hateful and veangeful towards the bank who is taking it back.  Why?  It’s not the banks fault that either you screwed up and weren’t responsible or that you had some terrible life altering situation and you can’t manage any more.  Why punish the bank just because you are screwed?  The bank is simply trying to cover their backs so they don’t end up like you… bankrupt.  They are simply doing what YOU AGREED TO in your contract.  You can’t blame the bank for what’s happening to you.  I can’t understand why these people who end up in foreclosure can’t just vacate with some respect and grace.  Don’t try to make everyone else suffer along with you.

I had an interesting thought the other day while checking out a neighborhood we like.  I feel like this point in time is an opportunity for change and sort of… well… a “cleansing” period.  People who never should have had homes are being forced out to allow people with some sense to take over.  Now before you go cussing me out… please know I do not mean that statement towards anyone who has suffered circumstances beyond their control.  I realize a lot of people out there are suffering and being evicted because of things they had no control over and I truly am sorry for them.  I am only talking about people who somehow got a home, had no intentions of maintaining it from the beginning, and just decided screw paying the mortgage.

I spoke with an older woman in that same neighborhood.  She had been there since it was first developed in 1996.  I asked her how she fealt about it currently.  She said “don’t let the less appealing houses around here scare you away. This really is a great community.  Most of those people are losing their homes and won’t be here much longer. A lot of them have already left and we really don’t have any problems in this area.”  She then proceeded to point out the homes that were previously foreclosures and are now being renovated and made like new again by someone with some sense.

It’s just sad to me.  People just don’t take pride in their investments and their lives anymore.  They don’t care about their neighbors or if they live like slobs.

This also got me thinking… I hope that with all the tax credits, grant programs, and foreclosures… that we don’t end up putting more idiots into these homes that won’t take care of them.  I truly hope we don’t see a major downfall in quality of neighborhoods because people with lesser income get in there and can’t afford the upkeep.  I think part of the problem is a lot of people who buy a home have that “apartment mentallity”.  Meaning, when you live in an apartment you don’t have to take care of anything.  There are no upkeep expenses besides your rent.  So these people move into a house, not realizing that if the roof goes bad, they have to pay for it.

It’s a sad state we are in.  Just another topic to add to my long list of disappointments.

This is fantastic news for my husband and I.  We are still trying to find a buyer for my parents house and we cannot buy our first home until that one sells.  There would be no one to pay my parent’s mortgage.  We are also still trying to work out our conditional mortgage loan commitment.  We have to work a few things out in order to be approved now.  Otherwise, we are gauranteed a loan in February 2010.  If they hadn’t extended the tax credit, we might have missed out on it.

For those people who are already questioning whether or not the government will extend it yet again, even farther, if you can buy now… I highly recommend it.  It did seem that they were quick to extend this and eager to do so, but there is a lot of controversy about the debt our government is incurring by approving the first time home buyer credit.  There are no gaurantees it will be around after this new expiration date.  Besides, buy now… help the economy!

Since we listed the home for sale, we seemed to hit a dry period with no potential buyers and no showings. We had a lot of issues here in Grove City Ohio with the Southwestern school levy not passing.  It caused a lot of problems in the community and practically devalued our schools overnight.  Well, we voted again and the levy passed.  On one hand, I don’t want to pay more taxes, but on the other hand… it was a nightmare for the real estate market in Grove City.  I have heard from a Mortgage Broker, a Mortgage Lender from 5th 3rd bank, and my Realtor that the levy failing the first time had a big impact on home sales.  Now that it passed the second time around, I am really hoping to see more buyers.  Grove City has always been well known for having good schools and good neighborhoods.  When the levy failed, we no longer had student bussing or extra curricular activities.  All should be good now though.

The initial plans are to extend the expiration date and slightly modify how it works.  Instead of the first time home buyer tax incentive expiring on November 30th as expected, you will now have to have a signed purchase contract by April 30th, 2010.  So, you must be IN CONTRACT by April 30th, 2010.  Then they are allowing an additional 60 days to complete the sale and close no later then July 1st, 2010. 

I personally am very grateful for this extension.  My husband and I have been scrambling trying to help my parents find a buyer for this home we live in (their house) and let me tell you… we are running out of time.  I was going to be extremely disappointed if we missed out on this tax credit.  Now I feel a bit more relieved and not so much pressure.

In addition, there are talks of another perk to be worked into the first time home byer tax credit that would benefit sellers.  The credit will now offer a $6,500 tax credit to home owners who sell their primary residence that they owned for at least 5 consequtive years in the past 8 years.

The income limits will also be raised.  Individual from $75,000 to $125,000 and couples from $150,000 to $250,000.

Other people are saying that the increase in income may be too generous… giving a helping hand to those who really do not need it.  On one hand, I agree with that.  I feel like this government money should only be used to help those in need, not those who make enough money that they could clearly adapt to whatever income problem they might have because of the economy.  On the other hand, there are people who have had sudden income changes because of the economy and even those who were well off, are now stuck in homes about to go into foreclosure.  Maybe this well help them avoid the foreclosure?  I also suppose if it gets more movement into the housing market and more money flowing, it may be of some help to the economy… and therfor… everyone.

All in all, my husband and I are very pleased to hear about this extension.  Now it’s just a matter of them making it official.  Hopefully they do.

I found this one book in particular at the library, “Find It, Fix It, Flip It!”.  I had checked out about 9 books and I kept this one over and over, forgot to return it, and got a late fee.  Then I ended up ordering a used copy for myself to keep.  That is how much I liked it.  I am not big on promoting other people’s products… unless it’s really something good.  I found this book to be very useful.  Not only for learning about flipping houses, but also just about buying our first home.  It speaks very plainly and explains any technical real estate jargon you might need to know.  It’s good for beginners.  It explains the whole process from buying, renovating, and selling.  It’s an older book so it was written on an up market, which is the opposite of our current down market, but it does explain the differences for each market. It’s also extremely cheap to get online now (click the image to find a cheap used copy).

I just wanted to share this with any of you that would like more information to get started on flipping homes or maybe for those who already do… just to learn more about it.  Like I said though, it’s a good resource for first time home buyers too that might be looking to buy a fixer-upper house.