Myself and my husband are both self employed, we have two children -In 2007 we were doing well and decided to purchase a larger home, so we placed our home which we had lived in for 7 years (have a mortgage at a credit union) on the market. A sale was pending so we purchased a larger home contract for deed, as we could not get a mortgage for it until the other sale was final – but there was an adendum to where the then buyers needed to be in by a specific date so we had to be out by the date the sale was scheduled for. The sale fell through due to the "buyers" on the day before the closing was scheduled – so we were left paying for 2 homes… we had to carry both homes then from 9/07 – 01/08 paying excessive interest for the home we moved into as we were unable to get a mortgage on it until we sold the other one… – this drastically cut our savings down to nothing – 1/2008 we had to sell the house contract for deed (the original house we had lived in for 7 years) – or lose it to the bank as we could no longer continue to pay for both – we closed on the sale 1/11/2008 – they buyers have a 3 year balloon to come up with their own mortgage – after the sale is complete – we will have taken a total loss of ,000.00 on that house. So the amount of money which the "cfd buyers" pay to an escrow agent – who then cuts us a check – which we then take the the bank to pay the mortgage on – and then place the remainder into a escrow account for the property taxes and home owners insurance on that home – leaves us with approximately .00 income each month (which we get to pocket – whoopie) but it allows us not to be foreclosed upon – now when the sale is final and they get a mortgage – we will only get ,000.00 (the difference from what they owe to us and what we owe to the bank on that house) 2 years from now.
Now – here is my question – 2008 has been a HORRIBLE year for my family – the economy has made my husbands self employment income to drop nearly 75% – and while mine increased from the previous years, it by no means has increased enough to make up that difference – additionally there were multiple situations that came up during 2008 that drained us – (i.e. child illness, one child with dissabilities, furnace went out, gas leak for 3 days, powerbills skyrocketed, you name it, it probably happened to us this year) now – we are now facing bankruptcy as all of our savings is gone – and everything is backing up it is everything we can do now just to make the house pmt, car pmt and insurance and survive. My husband is a contractor – so winters are usually slow anyway – but due to the economy people just can not afford extras – we’ve always built up savingns during the spring and summer months and set aside for the winter – that was not possible this year. Now we qualify for the EIC which we desperately need. but due to the sale of the house CFD – they (the CFD Buyers) paid just over ,000.00 in interest which then came to us – but we paid just under ,000.00 in interest to the credit union which holds the mortgage. – but in having to claim the ,000.00 interest income – (no matter whether we itemize or take the standard deduction our tax is 0 because we add our self emp tax at the end) the only chance we had of a credit was the EIC and additional child tax credit – and Not being allowed to claim the EIC because of the ,000.00 of interest income (which did NOT benefit us as income, as opposed to the .00 that we did get to keep during the course of the year) eliminates our ability to take the EIC because it’s over the ,000 and some odd dollar Interest income allowement)
Is this right? If so this leaves us owing the IRS more money (which we absolutely do not have) than we will make on the sale of the house in total when it’s complete (not considering the entire thing is at a overall loss anyway) I do not have to file form 6620 or schedule D because it was a loss, but the interest apparently I do have to claim – as income – when it wasn’t…
Is there any LEGAL way to only have to claim the interest income of .00 which we did get to keep – as opposed to the entire amount?
If not – we’re going to end up on the street living in a box eating trash. I’m saddened to think that we’ve worked for so many years for nothing – my husband is 37 years old and I am 30 – both of us have always worked more than full time – and now my husband has not worked more than 40 hours since October – and things were slower in August and September than usual – who knew this was going to happen -(No one can plan for everything to go wrong in 1 year as it did for us) Now what….?
Please help if you know what you are talking about… If you do not know about taxes, EIC, Contract for deed/Installment sale, or are just plain rude because your situation is not nor has ever been grim due to no fault of your own, please keep your comments to yourself. (I only say this because I have read several other answ
**I disagree that I got that 00.00 to spend even if it (doesn’t feel like it) because I did not get to keep and "spend" more than .00 of that money. Out of that 00.00 per our contract we are required to give to the bank that holds the mortgage so that the house is not foreclosed upon since these people are paying the payments – the contract also states that out of that 00.00 we have to set aside so much each month into escrow to pay the property taxes and their home owners insurance (which is in their name). Therefore that was not OUR money to spend…. We simply "worked for them" by obtaining the mortgage, paying the payment for them to remain in the home, pay the property taxes so that there is not a lien placed on the house, and pay their home owners insurance which they were required to obtain -All we should have to list as Income is the .00 that was actually income to us, and not take the credit from the 1098 from the bank holding that mortgage…
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