The first-time homebuyer credit was established as a way to encourage home ownership. This credit generally doesn't require repayment as long as the purchaser uses the home as a primary residence during the 36 months following purchase. Contrary to popular belief, an individual or couple who previously purchased a home can be considered first time home buyer(s), but only under certain conditions. To determine how a spouse's current or prior ownership of a home affects your eligibility, you will need to understand federal requirements governing first-time homebuyer status.
Definition and Eligibility
The terms that define eligibility for first-time homebuyer status are found within the federal tax code under Section 36(c)(1). It explains that a party must not have had ownership interest in a principal residential property within 3 years before buying a new home. The 3-year term is counted from the date the previous property was purchased, not from the time of actual occupancy.
Marriage and Legal Separation
In the event that a single person buys and lives in a home as a first-time homebuyer then marries, the new spouse is considered to have ownership interest in the home they occupy. This still applies even if the spouse hasn't previously purchased a home. Marriage makes the property a common asset, even if the new spouse's name isn't on the mortgage. If the couple legally separate, they are nevertheless considered married under law and as such, neither could qualify as a first-time homebuyer.
Filing of Taxes
If a legally separated, married couple file their taxes as "married, but filing separately," they are still considered joint-home owners of the property bought by the purchasing spouse. Whether they file jointly or separately, the government considers each spouse a homeowner. According to the tax code, eligibility is limited to individuals and their spouses who have not had ownership interest in a principal residence within the past three years.
If an individual purchases and lives in a home as a first-time home buyer for a year before marrying, then moves from the home with his new spouse to a leased apartment and rents out his owned home for the next 3 years, the couple would both qualify as first-time home buyers if they sell the owned property in year 4 and purchase a new home together. This is because the owned property wasn't their principal residence during the previous 3 years.
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