Ask Money

The homebuyer credit

Chris Farrell Oct 19, 2010

Question: My husband and I are big fans of the show, and thought you might be able to shed light on our predicament:

We were married in November, then sold our home in April and purchased a home to take advantage of the repeat home buyer’s tax credit because he owned his home for 12 years. We were have since found we were ineligible for the credit because we did not own the home together for the last 5 or more years.

From what I understand, if I had purchased the home on my own before our marriage, I would have been eligible for $8000 as a new home buyer. If he had purchased a home before our marriage he would have been eligible for $6500 as a repeat buyer, but since we were married, we are no longer eligible for anything.

Please help provide clarity! In our minds, this does not make any sense. Jennifer, Cincinnati, OH

Answer: Sad to say, it looks like you got the rules right. Welcome to the bizarre world of credits and deductions, especially when they’re done on the fly. Fact is, the rules and regulations, phase-ins and phase-outs almost never make any sense.

Why the requirement that a married couple had to live in the home for 5 years? Why not 3 years or 1 year? And why did the government define a first-time homebuyer as someone who hadn’t owned a home for 3 years? To me a first-time home buyer is someone making their first purchase ever. I could go on. But you get then point.

The reason for the weirdness is that lawmakers tried to craft a bill that would encourage enough folks to take advantage of the home buying tax credits to stop the housing market’s downward spiral without making the tax benefit so generous that it unleashed another tidal wave of red ink.

I wasn’t a fan of the policy. It was geared toward propping up home prices, the definition of a perverse public policy. Artificially holding prices at above-market levels harmed home buyers, from young adults starting their own households to immigrants putting down stakes in the American Dream to people like you and your husband. The subsidies wrongly delayed the inevitable home market price adjustment to excess supply in many markets across the country.

However, that’s cold comfort to you. You should still check with an accountant. There may be something we’re missing. But it sure appears with the information you’ve given me you don’t qualify for the credit. Sorry.

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