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!

I just wanted to tell you that… sure enough… they are falsely dating my documents again. I sent our tax return via Express Mail with delivery confirmation and signature required. My delivery confirmation shows it was delivered and signed by the IRS on 4/7/2010. I just got off the phone with them and they are trying to tell me that it was delivered 4/28/10. That is a whole THREE weeks later!!! Of course, the lady I spoke with wasn’t helpful at all. She just kept telling me there is nothing I can do about it. BS!!! She then told me to write a complaint to the office that received my return.

This is ridiculous. That is the IRS for you, trying to be sneaky and buy themselves more time to delay. For anyone who doesn’t know, these dates are very important if you want anything done in a timely manner.  The IRS employees have time frames to abide by.  I am being told I have to wait 8 weeks from the date they “received” it for them to process it.  So they conveniently tack on an extra 3 weeks saying my return didn’t arrive when it really did.

So, here we go.  Yet another reason why you have to stay on top of the IRS at all times.  And had I not called and questioned them repeatedly about my refund status, I never would have known they put the wrong delivery date in.  Don’t trust the IRS people!!

 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.

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.