No one likes tax time… And, yes this is another rant about how incredibly complicated and ridiculous the tax code in our country is…

So, Jenni and I recently moved out of the condo into our first conventional 3 bed, 2 bath ‘home’. We did this mainly because we want a family one day (one day is now mid-September 2010), but also because there was a carrot extended to us in the form of a housing stimulus tax credit. Or so we thought…

We thought we were qualified (as did our Realtor, Lender, everyone else we spoke with) for the long-term resident tax credit that was introduced with the expansion of the original bill. We were all wrong.

The Q and A below explains how we do not qualify (available here):

Q. I am a long-time resident and current homeowner and my spouse is a first-time homebuyer (has had no ownership interest in a principal residence during the three-year period ending on the date of purchase of a new principal residence) and we purchased a new principal residence. Can we qualify for either the first-time homebuyer credit or the long-time resident homebuyer credit if we purchase a new principal residence?

A. No. Both you and your spouse must be first-time homebuyers in order to qualify for the first-time homebuyer tax credit. Since you had an ownership interest in a principal residence during the three-year period ending on the date of purchase, neither you nor your spouse qualifies for the credit. Similarly, both you and your spouse must be long-time homeowners of the same previous principal residence in order to qualify for the long-time resident homebuyer credit. Since your spouse is not a long-time homeowner of your current principal residence, neither of you qualify for the credit. (12/14/09)

So, how did we miss this extremely important detail? I am not totally sure, but the “(12/14/09)” at the end of the explanation surely makes it look like this was added after the wheels were in motion on our purchase.

Okay – so it sucks. We are going to miss out on $6,500. Ouch.

What frustrates me the most though is after reading Form 5405 several times I can now say with a great deal of certainty that law makers hate married people. I now know that if I had divorced my wife the day before closing on our home, and we entered into that purchase as two, non-married people, we would have not only qualified, but we would have actually been eligible for $7,250 instead of $6500! I would have loved to put the extra $750 towards a great second honeymoon for use with Jenni when I happily married her again the day after our closing.

So, my extremely cynical advice to couples out there is to never marry – at least not legally. I am all for spiritual marriage; have a ceremony, exchange vows and rings, stay monogamous, raise a family together -  but there are so many financial incentives to stay single just like the one mentioned above.

There are however exceptions to this rule. I think it is a great idea to legally marry in the following scenarios:

  1. Tax incentives: Your partner does not work and can be claimed as a dependent
  2. Health insurance: Your partner requires health insurance and your plan at work will only cover a spouse

So, basically we can sum those up into marry your partner when he or she isn’t working, then divorce when they are gainfully employed. Toggle back and forth to maximize your benefit.