Boise Divorce Attorneys - Idaho Lawyers - Divorce, Military Divorce, Deployment and the $8000 Tax Credit

Boise Divorce Attorneys - Idaho Lawyers, Divorce, Custody, Military Divorce, Child Support, Visitation, Modification, call (208) 472-2383 for your free consultation.

What happens when you and your spouse purchased a home with the help of stimulus money for first time home owners and you get a divorce and must sell the home before the three year ownership rule kicks in? What happens if you are in the military and are deployed before the three years and you have to sell your home? What happens if you are in the military, you are deployed and you get a divorce and must sell the home before the three year time requirement?

These are common questions for Boise Divorce Attorneys. The law which governs this is set forth by the IRS and set forth in form 5405.

In general, if you get a divorce before the three year payback threshold, you must payback the $8,000 credit. The payback amount, however, is limited to the amount of the gain, if the home is sold to someone not related to you. You must include the amount of the credit to be paid back, generally the entire $8,000 unless the gain from the home sale is less than that, as an additional tax on your tax return. For Boise Divorce Lawyers, this is an easy answer.

If you are in the military and you are deployed, you are exempt from paying back the tax credit if the home is sold before the three year payback threshold. For Idaho Lawyers, this is an easy question.

Here is the tricky question for Boise Divorce Attorneys - What if you purchase the home and you are deployed and you get a divorce before the three year payback threshold? Then what?

According to the IRS and Part III, line 12 of IRS Form 5405, if the home is sold in connection with Government orders for qualified official extended duty service you are not required to pay back the credit. Qualified official extended duty service means serving at a duty station at least 50 miles from your home or living in Government quarters upon Government orders. You are on extended duty when you are deployed for active duty for more than 90 days and for an indefinite time period.

So what happens when you have two triggering events; deployment and divorce? As a Boise Divorce Attorney I think the answer lies in the chain of events. Did you get orders for deployment and were prepared to put the home on the market and then decided to divorce? Did you get orders for deployment but were already in the process of divorce? Did you file for divorce and were subsequently deployed? Basically, what was the actual reason for the sale of the home? Divorce or deployment?

What happens then if the time line shows that the actual reason for the sale of the home was divorce? If the home is sold, pursuant to the divorce decree, the credit is to be repaid by both parties in equal amounts. If the home is transferred to an ex-spouse pursuant to a divorce settlement, the responsibility of repayment of the total credit shifts to the spouse receiving the home if they sell it before the three year period.

One further complication for divorce lawyers and divorce clients - what happens if the divorce occurs before the three year period and as part of the divorce settlement the home is to be sold but the home does not actually sell until after the three year period expires? Repayment of the entire credit does not kick in until the actual date of the sale. So, if the sale does not happen until the three year period expires, no repayment is required.

Another further complication for attorneys and client alike, we are after all dealing with the IRS, is payback in general. There are actually two different types of payback and two different requirements depending upon when the home was purchased. If you purchased a home in 2008 and you hold onto the home for the long term you must begin repaying the credit with your 2010 taxes over the next 15 years. If, however, you purchased your home after 2008 and you do not sell it you don't have to repay the credit. Even if you sell the home purchased after 2008 before the three year threshold, you may not have to pay the credit back if you acquire a new home within 2 years and you live in that home for the remainder of the original 36 month period. And of course, because it is the IRS, there are all sorts of exceptions and limitations depending upon other triggering event (condemnation, foreclosure etc.). How can a tax attorney keep all this straight?

If you need to speak with a Boise Divorce Attorney or you have questions about divorce, military divorce or other family law issues, please call (208) 472-2383.