Dear Tax Talk,
My husband and I just bought a second home in Florida and we're wondering if it might qualify for the replacement home tax credit. I live and work full time in Chicago. My husband is a boat captain and lives and works near the new home we purchased. We've owned our home in Chicago for more than five years and were curious if, due to our living apart, we could qualify for more than one home? Thanks.
The first-time homeowner and replacement home tax credit expired April 30th. An exception exists if you've entered into a binding contract on or before the expiration date and close by June 30th. Given that the law is new and it has already expired, the guidance available in answering questions is limited and additional clarification probably won't be forthcoming.
The closest I can come to some guidance on your question is the following from an article on IRS's website:
I am a long-time homeowner of a principal residence and my spouse is a long-time homeownerof a different principal residence. Can we qualify for the long-time resident homebuyer credit if we purchase a new principal residence?
No. Both spouses must have owned and used the same previous principal residence for five consecutive years out of the eight-year period ending on the date of purchase of the new principal residence to be eligible for the credit. Since you and your spouse owned and used different principal residences, neither of you qualify. (12/14/2009)
By inference, it would seem that if the replacement home is not the principal residence for both spouses, it would not qualify for the replacement home tax credit. However, the law is more clear on the preceding point and unsettled as to your situation.
As an alternative, you can read into the question that the IRS recognizes that spouses can have different principal residences for a long time. Add to that there is no requirement that you sell or transfer your prior home, I think your husband is getting closer to taking the replacement home tax credit if he can show that it truly will be his principal residence. If Florida will become his home, he should document it by applying for a Florida license, registering and insuring his car, applying for homestead, registering to vote, finding a doctor and dentist, and maybe even bringing a family pet along.
While the answer is not clear cut today, as long as he is relocating, these steps will go along way for making the case down the road when perhaps additional guidance emerges.
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