I took my obamabux, but I need to run...

September 10, 2010 11:09 AM

I bought a house and used the recovery plan tax credit, but now I might have to relocate for my relationship. How do I make this work without losing my shirt?

This is anonymous because I realize that the gist of my question is quasi-legal at best -- plus, I don't want my current employer to know I'm looking to move.

I bought the house late last year and put the $8,000 into the house in the form of a new kitchen, and I'm just finishing renovations to that part of the house now. The house probably can't be sold as is without taking a big hit because part of it (the master suite) is down to the studs in preparation for a major bathroom renovation, re-insulating that space, and replacing all the windows. Unfortunately, my significant other has been laid off and will need to seek a new job -- and it's likely to be halfway across the country. There is no way that I want to be apart from her for the two years that I'm still tied to this house -- much less the six months that it would take me to finish and sell it. It's also not feasible to pay for the house to be finished (to the tune of about $20,000 to finish the work -- which is why I'm doing it myself), to lowball sale it under my purchase value because the market here is softer than a cotton ball, and THEN take the hit on the taxes in April.

So, given that situation -- I can finish the renovations and then move. Living apart for the years I need to "keep" the tax credit is not an option. Paying to complete the renovation, selling the house, and repaying the tax credit would be about a $40,000 hit, which I do not have.

Can I mask that I've moved and still keep my "primary residence" in Texas while living with her wherever she ends up? What is the government looking for as far as that definition? Any other way that anyone can see to "solve" this sticky situation?

posted by anonymous to Law & Government (2 answers total)

Treasury Regulations, Subchapter A, Sec. 1.121-1:

(2) Principal residence. In the case of a taxpayer using more than one property as a residence, whether property is used by the taxpayer as the taxpayer's principal residence depends upon all the facts and circumstances. If a taxpayer alternates between 2 properties, using each as a residence for successive periods of time, the property that the taxpayer uses a majority of the time during the year ordinarily will be considered the taxpayer's principal residence. In addition to the taxpayer's use of the property, relevant factors in determining a taxpayer's principal residence, include, but are not limited to--

(i) The taxpayer's place of employment;

(ii) The principal place of abode of the taxpayer's family members;

(iii) The address listed on the taxpayer's federal and state tax returns, driver's license, automobile registration, and voter registration card;

(iv) The taxpayer's mailing address for bills and correspondence;

(v) The location of the taxpayer's banks; and

(vi) The location of religious organizations and recreational clubs with which the taxpayer is affiliated.

posted by smackfu at 11:23 AM on September 10, 2010

How much does your SO make? Does she make signifantly more than $40,000 a year? How much would the moving expenses cost? If she doesn't make a ton of money, then it seems more reasonable to stay in the house another couple of years. Can you afford to carry the house yourself?

You don't mention what type of job you have. If she moved, would that mean you would have to find a new job too or could you work from home? If you would also have to find a new job, then you get into the situation where she is the one with the job, while you are looking for a job. Essentially you would be trying to find two jobs, instead of just one.

If you both plan to have a future together and are currently mixing finances, you might want to sit down and seriously discuss the move. Would it really make financial sense for both of you two move rather than her staying put for a couple years (even if that means a period of long term unemployment for her)?
posted by parakeetdog at 12:22 PM on September 10, 2010