As I understand it, if you make more than $170 jointly or $95K individually you will get no tax credit. The provision has an income phase out at $150K and $75K and any income a taxpayer has over that amount that is reduced by the amount the excess bears to $20K. So, in my reading if you make $10K more than the limit, the credit would be reduced 50%.
I am not sure how the IRS views who’s name is on title and whether you would be allowed the credit if both your names were on the title but she filed individually. I might worry about masking the true intent of the purchase just to get the credit.
There are a fair amount of issues I see with putting title in your wife’s name alone too. First, heaven forbid what if you do get divorced or something bad happens to one of you, the property would be in her name. This has consequences. Second there may be some community property issues to consider. Also, if you refinance, the loan company will inevitably put the property in both your names. This may be considered a change in ownership. This could trigger the recapture provision of the IRC 36 that says if you sell the property in 3 years, you have to pay the credit back. You no longer have to repay the credit (as was required when it was initially passed over 15 years) unless you sell within 3 years.
Lastly, there can be some other consequences with the decision to file jointly or individually. You may or may not be aware of them, and I am not sure they would be $4K consequences. However, it might be best to be informed about them all.
I think you might want to talk to an attorney or a tax professional before going forward with your plan. Probably not the answer you wanted, but thought I would throw out some of the potential consequences that jumped out to me. I don’t hold myself out to be an expert here, but wanted to throw out some of my insight.
