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Had some questions about taxes and primary residence, Fiance…

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Had some questions about...

Had some questions about taxes and primary residence

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

Fiance and I are considering getting married before the end of 2017. We are trying to see if this will help or hurt us when it comes to taxes

Accountant's Assistant: Is there anything else the Accountant should be aware of?

I have 1 home and my fiance has two. I am a fulltime student with little income. I have a mortgage credit certificate on my house

Submitted: 6 months ago.Category: Tax
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Customer reply replied 6 months ago
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12/27/2017
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Tax
Satisfied Customers: 2,620
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Welcome to JustAnswer!

My name is ***** ***** I will be able to assist you.

First, we would have to consider you situations separately. If you weren't married this year would you and your fiance itemize your deductions or use the standard deduction?

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Customer reply replied 6 months ago
We have normally itemized deductions.
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

If you both itemize separately, then you would generally both continue to itemize if you were to file Married filing jointly in 2017- Therefore the deductions will still work out the same.

The next issue would be determining if your combined income would phase you out of any deductions

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

Generally, if your combined income is below $150K then you won't be phased out of most if not all deductions

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

I noticed you stated you were a full time student and did earn some income.

Did you qualify for the earned income credit last year?

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

If you earned under $15K last year with zero children you may have qualified for additional tax refutable credits.

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Customer reply replied 6 months ago
Im looking at my 2016 returns now. It looks like I had an EIC of $62.
Customer reply replied 6 months ago
The housing part is what confuses me the most. If we got married this week, we would only be able to claim one residence as a primary residence for all of 2017, correct?
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

Given your situation you would be able to deduct interest and taxes on one home as a primary residence and use the same items for deductions of the second home one as a "second home."

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

The third house would only be deductible if it were a rental property

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

If you both itemize, then you will generally be taxed the same.

Your combined income may cause your overall income to be taxed a little higher and exclude you from the $62 EIC.

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Customer reply replied 6 months ago
Specifically, I have a mortgage credit certificate on my own home which I haven't been able to utilize much as a student with little tax liability and it's been rolling over since 2013. It's almost a $5,000 credit now. We're wondering what's the best way to go about all of this as I probably won't be able to take advantage of it for another year or two. If we claim my house as a "second home" will my husband be able to take advantage of this credit
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

The mortgage credit certificate will have to stay with your home and the home will have to remain your primary residence.

"Principal residence.

Your principal residence is the home where you ordinarily live most of the time. You can have only one principal residence at any one time."

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

If you buy a home using an MCC and sell it within 9 years, you may have to recapture (repay) some of the credit.

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

Additionally, you may only carry forward an unused credit for three years maximum.

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

Your options are to either live in your home as a primary residence, rent your home out or sell the home and recapture some of the credit that you previously used, which may be very little to none since you were a student.

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Customer reply replied 6 months ago
Right, I understand those conditions, but I guess I don't understand how getting married and filing jointly would impact all of this. I.E, if we decided to keep my home as the primary residence and use fiance's places as rentals. If we filed jointly, would we be able to take advantage of the MCC this way?
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

You would have to complete the Credit Limit worksheet to see if you were still eligible for the credit based on your joint income.

Line 8 of IRS Form 8396The limitation based on tax liability

https://www.irs.gov/pub/irs-pdf/f8396.pdf

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

In order to complete line 8 of Form 8396, you have to complete your 1040 up to line 47

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

Therefore you will need your finance's complete tax return from last year and update that with any income and deductions changes combined with your tax situation.

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Customer reply replied 6 months ago
We already checked and we would still fall under the income limitation
Customer reply replied 6 months ago
However, how will the IRS determine which home we can use as the primary residence?
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

You determine which home is your primary home by how you use the homes

If in the event your primary home came into question the IRS would rely on the specific facts of the situation. For example, where your mail goes how close your work is.

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

Car registration would also be a tell tale sign of which home is used as your primary residence.

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Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

If you have no additional questions please take a moment to accept the answer by clicking on three stars or more so that JustAnswer knows that I have completed your question.

Thank you!

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Customer reply replied 6 months ago
when filing jointly, we could realistically pick whichever residence as primary residence for 2017 as we both lived in our own homes for all of the year?
Tax Professional: Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional replied 6 months ago

Yes, you could realistically pick whichever home is your primary residence. If the IRS were to question your primary residence you would have to prove you lived in the home.

You can only have one primary residence for your tax return, but the other home could be a second home.

The second home allows you to use all the same deductions, but would not allow you to continue to qualify for any mortgage credit certificate, which is reserved for a primary home for low income tax filers.

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