Home Selling in Denver>Question Details

Beth, Home Owner in Denver, CO

Unmarried couple, first time home buyers... what happens when we split up?

Asked by Beth, Denver, CO Tue Dec 27, 2011

My long-term boyfriend and I closed on our first house in early 2010 and claimed the First Time Home Buyer Tax Credit, with us each taking $4000. Our relationship is suffering and it's possible it may end, so I might be moving out. I do not know if he intends to stay in the house, but I suspect he will. We've been in the house for almost 2 years.

How exactly would this work? If I leave and he stays, will I need to repay my portion of the tax credit only? What happens if we sell? Are there any resources anyone could recommend for advice in situations like this?

Thank you!

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Ron Rovtar’s answer
Hi Beth:

I don't think there is any single answer to this question. Certainly a lot depends on your relationship during the split. It also depends on how the home is legally owned. (There are several types of ownership. You should talk to an attorney to learn your rights in your particular ownership situation). And then there is the mortgage, which may have provisions that influence what you must do.

I would suggest that you gather a lot of information about your particular situation. Once you have the info, it may be time to spend a few hours with a couples counselor who can help you and your boyfriend work through the details of the split in a logical rather than emotional way. The result for both of you will be better.

Depending on what you and your boyfriend decide, the final step could very well be selling this house. If this is the case, then it would be wise to interview several real estate agents. You will need someone with special skills. You will need someone with a high degree of empathy and some patience –– someone who can listen to two very different views of your real estate problem, who can avoid taking sides, who can help you work through disagreements as they arise and who can search for and (where possible) help you and your boyfriend find common ground.

It will be tough, but a situation like this can be resolved if everyone makes a commitment to stay calm, listen to each other and work for the best common solution.

Good luck!

Kind regards,
Ron Rovtar
Prudential Real Estate of the Rockies
Days: 303.981.1617
Evenings: 303.473.1926
0 votes Thank Flag Link Mon Jan 9, 2012
Maybe you should both seek relationship counseling before you go through the pain in the rear of splitting up the equity in your home.....
0 votes Thank Flag Link Tue Dec 27, 2011
Break ups are not easy......financial issues can make them even more complicated

if you sell before 3 years are up, the credit has to be repaid.....It is my understanding that if the house is sold at a large enough loss, the tax does not have to be repaid..........I strongly suggest you verify this and check with your CPA

Just out of curiosity, if you leave and he stays, is he prepared (and able) to buy out your share?
0 votes Thank Flag Link Tue Dec 27, 2011

Sorry to hear the bad news. I would suggest a good real estate attorney and also also both of you have a good chat with your accountants. It's complicated; but not all that unusual. It can be worked out through the right channels. A realestate agent is not the right channel for this advice. We are not allowed to practice law or give legal advice to our clients. I hope first of all that you guys can get things worked out. But if not this will give you the chance to get everything in order so you are clear on what to expect. All the best.

Robert McGuire ASR
Your Castle Real Estate
1776 S. Jackson St. #412
Denver CO 80210
Direct – 303-669-1246
0 votes Thank Flag Link Tue Dec 27, 2011
I suggest that you contact a local domestic relations attorney to assist you with all of your break up issues. There is more to your situation than the IRS tax credit. A major issue is making sure that you no longer have your name on the mortgage, as that will affect your credit history, especially if your former boyfriend is late on payments or stops paying the mortgage. The domestic relations attorney you retain will probably know about the IRS tax credit already. However, if he/she does not know, that info is readily accessible.
0 votes Thank Flag Link Tue Dec 27, 2011
This is a question that should be discussed with your accountant and perhaps a lawyer as well.
0 votes Thank Flag Link Tue Dec 27, 2011
You will want to be taken off title but if he is going to keep the property he will need to refinance it and also remove you from the loan.
0 votes Thank Flag Link Tue Dec 27, 2011
Thank you all for your answers! A few points I should have mentioned: we are joint tenants. We put 10% down - he put 8%, I put 2%. If I do move out I will want to be taken off the title, so we'll either need to transfer ownership to him or we'll need to sell together.

Thank you!
0 votes Thank Flag Link Tue Dec 27, 2011
Hi Beth, it's best to consult a CPA or a tax attorney on this subject. You will need to provide all the documentation showing when and how the tax credit was taken and divided between the parties. Also, there is a lot of information you can find on line regarding First time buyer tax credit. There were several programs and it's always a good idea to educate yourself which one apples to you. Best of luck!
0 votes Thank Flag Link Tue Dec 27, 2011
Ugghh!! Sorry: These are the sorts of issues that best would have been addressed going in. And sorry about your circumstances.

Best thing to do would be to check with an accountant.

The IRS has a lot of questions and answers online about dealing with the first time home buyer tax credit. See http://www.irs.gov/individuals/article/0,,id=233589,00.html

That page states in part:

"You purchased your home in 2009 or 2010.
For the three years after you receive the FTHBC, the IRS sends you a letter called a Notice CP03B, Courtesy Message About your First Time Homebuyer Credit. This notice lets you know what to do if you sell the home or it is no longer your main home. Generally, you must repay the entire credit for the year you sell the home or it is no longer your main home. There are some exceptions to this rule, however, and you do not need to repay the FTHBC for a home you purchased in 2009 or 2010 if it remains your main home for the three years after the purchase. To repay the credit, you must attach a completed Form 5405 to your federal tax return for the year the home stops being your main home. Find more information here on Repaying the Credit if your home is no longer your main home."

And if you were married:

"Divorced Persons
If you (transferor spouse) transfer your main home to a spouse or former spouse (transferee spouse) under a divorce decree, the transferee spouse who keeps the home is responsible for repayment of the entire credit if, during the 36-month period after the purchase of the home, the home ceases to be his or her main home. You (transferor spouse) are not responsible for any repayment of the credit. (1/6/11)"

So you've got a bunch of issues. For instance--and I'm not an accountant so this isn't accounting advice--there is the question about whether the home remains a primary residence. However, ownership also enters into the equation, and that's not determined by who is physically in the home. (You'd remain an owner even if you moved out . . . unless you and your boyfriend reached an agreement regarding ownership.)

All of this is just a long way of saying that you absolutely need to consult with an accountant. And do so before making any decisions that could affect the repayment issue.

Good luck.
0 votes Thank Flag Link Tue Dec 27, 2011
Don Tepper, Real Estate Pro in Burke, VA

Great questions. Here is the link for the IRS. I hope it helps. Please feel free to call me if you need anything else. I also have a great CPA if you dont have one to talk to.

Shay Lowe
303.803.6258 Cell
Web Reference: http://www.irs.gov/
0 votes Thank Flag Link Tue Dec 27, 2011
The only answer you should seek is from a qualified CPA or by calling the IRS directly. The IRS reps are very friendly and will be able to answer your question.

Toll-Free, 1-800-829-1040

Best of luck~

Ray Williams
Branch Manager
Summit Home Mortgage
303.779.0591 x101
0 votes Thank Flag Link Tue Dec 27, 2011

How did you take the title to the house?

Marina Jensen
Web Reference: http://www.MarinaJensen.com
0 votes Thank Flag Link Tue Dec 27, 2011
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