Back in July I wrote about the first-time homebuyer tax credit that applies to home sales occurring before December 1, 2009. However, there is some great news for prospective homeowners unable to squeeze in a purchase in that timeframe: Reuters is reporting that the credit may be extended for another six months. With bipartisan support in Congress and recent hints that President Obama will back such an extension, the amendment is likely to pass.
Also, we have received queries from readers regarding the effects of divorce on the credit. A common occurrence in divorces is that an ex-spouse’s name continues to remain on a deed while he or she no longer lives in the residence. As long as the ex-spouse has not lived in the house at all over the past three years, and as long as the divorce was finalized three or more years ago, the ex-spouse will qualify as a first-time homebuyer because the house is not his or her primary residence. Of course, this assumes that the ex-spouse does not reside in other real property that he or she owns.
The situation is different when a married couple is separated and the divorce has not been finalized. Under the rules governing the credit, ownership of a primary residence by one spouse imputes ownership onto the other spouse even if they are legally separated. In such a case, it does not matter if the other spouse’s name is on the deed or not both spouses will be disqualified as first-time homebuyers.