Homebuyer Tax Credit vs Child Support

By
Real Estate Agent with Native Sun Realty, Inc.

The $8,000 tax credit is a great incentive if it actually goes to the first time homebuyer.  Here is a situation where I was caught of guard.  I had a buyer who closed on their new home in 08 and was eligible for the $7,500.00 tax credit.  When he filed his tax return he was getting the full credit plus an added amount due to excess withholdings from his earnings during the year.  He had already made several improvements to the home on credit and was planning to pay off the debt with the tax credit.  Sounds like a good plan until he learned that his entire tax refund including the $7,500.00 tax credit went to his x-wife for back due child support.  The real kicker is that he was awarded custody of the children who have been living with him since he bought the home.  Apparently there was a period of time where he was unemployed and unable to make payments to the x wife while she had custody.  Even though the court awarded him custody of the children the x-wife is still entitled to the back due payments.  I did not consider this otherwise I would have counseled him to avoid spending the money before he got it.

It might be a good idea for all REALTOR's to make buyers aware that there may be situations where the tax credit goes to someone other than the home buyer.  If he had adjusted his tax withholdings during the year based on the expectation of receiving the credit he may have been stuck with a bill from the IRS.

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Rainmaker
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Michael A. Caruso
Surterre Properties - Laguna Niguel, CA

Hi Lucien,

Wow, that is a tough situation. I have encountered many friends who have had to deal with similar situations. Especially with today's economy and people losing their jobs, it's easy for the child support funds to pile up--especially since there are penalties/interest charged for late payments....

Michael

Mar 14, 2009 06:58 AM #1
Rainmaker
61,955
Brent Johnson
Chase International South Tahoe Realty - South Lake Tahoe, CA

That is a tough one. The buyer should have talked to an accountant before spending the money!

Mar 14, 2009 07:01 AM #2
Rainmaker
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Sonja Patterson
Keller Williams - BV - College Station, TX
Texas Monthly 5-Star Realtor Recipient for the Hou

Thank you for sharing your story.  It is always good to assume you WON'T have the funds until you DO have the funds in hand.  I feel most sorry for the kids in this situation. Hopefully, they will have a peaceful home in which to live.

Mar 14, 2009 07:30 AM #3
Rainer
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Lucien Vaillancourt
Native Sun Realty, Inc. - Jacksonville, FL
Jacksonville Florida Real Estate

Michael,  Yes it is a tough situation.  As I understand it he is having difficulty making payments.

Brent, Words of wisdom.  Don't count your chickens before they hatch!

Sonja, I agree.  The children are not being well served by this action.  Especially since the mother has used the money for personal enhancements.

Mar 14, 2009 08:02 AM #4
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Rainer
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Lucien Vaillancourt

Jacksonville Florida Real Estate
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