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First-Time Homebuyer Credit – Residency Exceptions

Previously, Mike Anderson and Jill Helm had provided certain information regarding the first-time homebuyer credit. This blog will provide additional information regarding the residency requirements for individuals and married couples.

For first-time homebuyers that are married, both spouses have to meet the residency requirements to qualify for the credit as illustrated in the following examples. The same requirements apply to the long-term resident credit

Illustration # 1:H and W are a married couple. H has never owned a home. W previously owned a home but sold it in 2003. H and W are first-time homebuyers for purposes of the credit.

Illustration # 2: H and W, a married couple, want to sell W’s home, which she owned when they got married, and purchase a new home. H has not owned a home within the previous three-year period.

Neither H nor W is a first-time homebuyer. W does not qualify because she owned a principal residence during the previous three-year period. H does not qualify because his spouse (W) owned a principal residence during the previous three-year period. H won’t qualify for the credit even if he files a separate return.

Illustration # 3:Taxpayers A and B, two single individuals, purchase a home together. A was a first-time homebuyer at the time of purchase, but B was not. Later that same year, A and B marry. A may take the maximum credit because eligibility for the credit is determined on the date of purchase and he had not owned a principal residence in the previous three-year period before the purchase.

Illustration # 4:Taxpayer purchased a home on April 24, 2009, while she was separated from her husband. Later in the year, they reconciled and were living together at the end of 2009. She hasn’t owned a home since 2004, but he owned a home that he sold in 2007. She is not eligible for the first-time homebuyer credit because her husband had an ownership interest in a principal residence within the previous three-year period, and she and her husband were legally married on the purchase date. She may not take the credit even if she files a separate return. 

George Woodard, CPA