2010 Tax Credits in California
First Time Home Buyer Tax Credit & New Home Tax Credit:
These programs begin on May 1, 2010 and are available to any taxpayer that purchases an eligible principal residence on or after May 1, 2010, and before January 1, 2011.
Tax Credit Form: 3549-A (seller completes – II, III, IV & buyer completes – I, V, VI), fax the application and settlement papers to 916.855.5577
The amount of the tax credit is equal to 5% of the home’s purchase price up to $10,000; $100 million has been allocated to each program (est. $200 million total). Tax credits are dispensed on a first come first served basis and each taxpayer is only allowed one tax credit (even if you qualify, you can’t receive a tax credit of more than $10,000).
It’s a tax credit that must be used over 3 successive tax years beginning the year in-which the house was purchased – $3,333 in tax credits each year. If the taxpayer does not use any portion of the tax credit in any year, credits do not “rollover” and are non-refundable. If you build your own home, it doesn’t qualify.
**Important: Your credit application must be faxed and it will be denied if it’s submitted on an ’09 form or if they receive the application before May 1st, 2010 or before the home closes escrow.
Who’s Eligible?
You are not eligible if you received a new home tax credit in 2009, if you or your spouse are related to the seller, if you’re under 18*, or if you’re a dependent of another taxpayer in the same year as the home’s purchase.
New Home Credit Details
A new home qualifies if it’s an attached or detached single-family residence (even a house boat) that has never been occupied. The home must be eligible for the state’s homeowners’ property tax exemption and the buyer must occupy the home as a primary residence for 2-years immediately after the purchase.
First-time Buyer Credit
A home qualifies if it’s an attached or detached single-family residence (house boats too); the home must be eligible for the state’s homeowners’ property tax exemption and the buyer must occupy the home as a primary residence for 2 years immediately after purchase. A home buyer is eligible if they haven’t owned a home in California for 3-years prior to the purchase date.
Answer to a Frequently Asked Question: “If the buyer is married on the date of purchase and either the buyer or the buyer’s spouse/RDP had an ownership interest in a principal residence during the preceding 3 year period, the buyer does not qualify for the First-Time Buyer Credit even if the spouse/RDP is not going to be on title.” from the Franchise Tax Board’s 2010 Tax Credit for New Home / First-Time Buyer web page.
**Important: You may not receive the tax credit if the Franchise Tax Board does not receive the application and settlement statement 14 calendar days after close of escrow.
Visit the link below for up-to-date information about the allocation of the tax credits. (Tax Credit Web Page)
Quick Facts:
2 different programs
1 taxpayer can not qualify for both programs
Married couples cannot qualify for more than 1 program
First come first served basis
Tax credit = 5% of a home’s purchase price up to $10,000
Must be used over 3 tax years – $3333 each year (remaining credits do not roll over)
Application and settlement statement must be received by the FTB within 2 weeks
Source: State of California, Franchise Tax Board – Tax Credit Web Page
2009 10,000 Tax Credit for Home Buyers
Update: The Tax Credit Ended on 8/31/2009 after all $100,000,000 was allocated through 10,659 certificates.
Late last week, California lawmakers approved a new budget that cut spending by $13 billion in an effort to reduce the state’s $42 billion deficit. Included in the budget is a provision allocating state funds for a $10,000 tax credit for home buyers.
The tax credit incentive represents hope for struggling home builders, but is it a repeat of the same thinking that brought about this economic turmoil? A large part of how we got into this mess was by making it easy for home buyers to temporarily afford a home, is this not another way of doing the same? Either way, it will be interesting to see how successful the tax credit is, and to see if it starts a trend in other construction dependent states.
The $10,000 tax credit is for home buyers that purchase a new home between March 1, 2009 and March 1, 2010. The bill set aside $100 million for the tax credit, so after 10,000 new homes are purchased, the credit is gone. Last month, an estimated 29,458 new and resale houses were sold statewide; if you want the incentive, you probably won’t want to wait until next March. Below are details about the tax credit.
1. The $10,000 tax credit is not a loan and if the home remains your primary residence for 2-years, you do not have to pay any portion of the tax credit back.
2. The tax credit is for new homes only. The construction of a new home generates more tax revenues than the $10,000 tax credit will cost, so the credit is limited to the purchase of new homes. You will not qualify for the state tax credit if you buy an existing home.
3. The tax credit is good for 5% of the home’s price or $10,000, whichever is less.
Examples: (price of home x .05)
- If you purchase a new home that costs $150,000, your tax credit will be $7,500.
- If you purchase a new home that costs $200,000, your tax credit will be $10,000.
- If you purchase a new home that costs $450,000, your tax credit will be $10,000.
4. Home buyers will receive the tax credit, in equal amounts, over 3-years.
Examples: (Tax Credit / 3)
- If your tax credit is $7,500, you will receive a tax credit of $2,500 each year for three years.
- If your tax credit is $10,000, you will receive a tax credit of $3,333.33 each year for three years.
5. Unlike the $8,000 federal tax credit, the California state tax credit is not limited to first-time home buyers.
6. There are no maximum income limitations so any buyer purchasing a previously unoccupied home can qualify for the tax credit.
7. The tax credit only applies if the purchased home is your primary residence.
8. There is no down payment requirement to receive the $10,000 tax credit.
9. The $10,000 state tax credit can be used along with the $8,000 federal tax credit for home buyers. If you’re a first-time home buyer, and you purchase a new home in California that costs more than $200,000, you’ll get $18,000 in tax credits.
10. The tax credit is limited to the first 10,000 new home purchases.
Some Quick Stats that Relate to California Real Estate
- Median Price of Houses and Condos in California – $249,000 (December 2008)
- Mortgage Rate on 30-year Fixed Loan – 5.335%
- State Tax Credit for New Home Purchases – $10,000
- Federal Tax Credit for Home Purchases (first-time home buyers) – $8,000
- YOY Change of Median Home Prices – -38% (December ’07 – ’08)
- # of California Homes sold in January 2009 – 29,458
- Unemployment Rate – 9.3% (December ‘08)
Sources:
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I am representing a builder on a new condo conversion building in which all of the units are brand new, never been lived in. We can’t technically call it “brand new” because the shell of the building was left standing. How do I know if this qualifies for the $10,000 CA state tax credit?
My brother is moving to Sacramento qualifies for this tax credit.
My wife and I are in the process of buying a house. The house we have just sold was in her name entirely. The house we are about to close on will be in both of our names. We make under the limit for adjusted gross income and file taxes jointly. Am I, as a first time homeowner, eligible for the $8000 tax credit even though she is not?
home owner tax credits last blog post..Home Renovation Tax Credit: What it Really Is and the Tax Incentives You Can Get
10k tax credit is good for CA considering the high cost of living. My only problem with this is who is really paying for this tax credit. What’s the economy going to look like in 10 years which is when the effects from this will start to rear their head.
Daniels last blog post..Transferring Balances in Credit Cards
This tax credit is a joke ! Considering house prices are exspected to drop another 14 % or higher. You do the math ! Bottom line is you have to have jobs to buy houses. This State is losing jobs by the thousands. And for the people that work for the State, you better hope you have a job by the end of the month ! Also house prices are to high in this State for the average person to buy.
The closing of my home was Feb 23rd. Can we get the tax credit? It is a bran new home. Thank you, Linda
my husband and i are curently in the process of purchasing our first home and were very eager to know more about this tax credit program. the house we are curently trying to purchase is in escrow and are trying to close it by the 20th of this month, well as we were reading about the tax credit it was brought to our attention that it was only available to new homes….what do you consider new? 0-10? 0-5? or maybe less?
How would we know if we qualified for the $10,000 state tax credit? How would we know if there are already 10,000 new home buyers, is somebody keeping track of the numbers?
I agree that incentives contributed to getting us in trouble in the first place, but the “bad loans” are what put us over the edge. I think these incentives will help people buy homes and this will help the economic recovery.
Richard@How To Videos´s last blog ..How Long Does It Take To Get Tax Refund Back
What a wrong headed approach to the current economic situation! Only new homes? What about the tens of thousands of foreclosed and unsold homes plaguing California? Sure this may stimulate tax revenue and bolster the flagging home construction industry, but those benefits are nothing compared to the immense amount of waste this credit encourages.
The tax credit is there to help home buyers who were unsure about investing in a new home to take a leap and get a mortgage for a house. The California lawmakers are not being stupid with this as the $10,000 is the maximum you could receive as the tax credit is good for 5% of the home’s price or $10,000 with it paid over 3 years there is less risk of housing fraud and going for a quick sale. The tax credit is there to help first time buyers but they have to make sure that they get a mortgage that is payable monthly for them and will not be too much for them to handle and cause bankruptcy.
chris@mortgage advice´s last blog ..A Guide To California Mortgage Rates
Yes, this is a dilemma that I struggle with. Are we supporting the longer term problem or is it a meaningful support to assist buyers and builders following the collapse of our economy. I must say all governments in the capitalist western world have followed a similar course, offering rebates and incentives for new home buyers. I just have this continued nagging feeling that the price is therefore still inflated and would it be smarter to allow the market to fall further, therefore allowing new entries into the market at a real price? Having said this, I see the immediate impact and the expectation it brings for new home owners, I am just not sure, like other commentators if this is the solution to a free market that peaks and troughs.
Gossiping around is that the state first time home credit is comming back in 2010,any information will be greatly appreciated.
I’ve been in the process of buying home since end of Jan 2010 the home is getting built so it would be a brand new home and I should move in 1st week or 2nd week of MAY so I MUST be closing escrow in end of APRIL or most likely middle of April. This is my 1st time buying a home so can I qualify for the $8,000 tax credit and this $10,000?
I bought my home(not new) in Feb 27, 2009 I got the $8000(Federal). Can I get any credit from California state?
Thank you,
Sameh
Hi Sameh – Here is a link that will help you, however the Cali tax credit is ending April 30th. California Tax Credit
Is it true for the CA state housing tax credit, that you only get as much back as you owe? so Say i qualify for $10,000 broken down into 3 years is $3,333/year. I only owe the state $1000 in taxes. Does that mean that I only get $1000 creit for that year, and do not get the refund of the remaining $2,333?
Thanks!
Debbie
If you sale the new home after 2 years, say in 2011, can you still claim the $3,333 in 2011? I’m assuming no because you have sold your primary residence in 2011.
The Tax Credit does really helps anyone in a way. There are really a lot of companies that can help you on this type of situations, even for first time home buyers. There are a lot of competitive options that you can take advantage of. Nice post.
Alex Monroe´s last blog ..Clearing Your Title When Your Mortgage Company Crashes
Why is it that you cannot be eligible for the tax credits (Federal or State) if you are related to the seller?? Does anyone know?
This tax credit was a short term fix on a problem that is going to take a long time to resolve. The basic thing is that home prices got way too inflated and now they have to come down. This tax credit allowed a lot of people who were on the fence about buying an incentive to go ahead and buy. But now that its over new buyers are back on the fence, as they should be. Prices are still way out of proportion form where they should be. Until the market comes down considerably this is going to be an issue.
Great post and blog by the way.
Correct – it looks like the home buyer tax credit extension didn’t pass, but neither did the extension of benefits for those who have been unemployed for dozens of weeks. It’s a very difficult situation to understand.
This is truly stabilising. Few of these intellection, collection and tips are real large and encyclopedic. I expect these present ameliorate me to applier up my skills a lot.
They need more incentives IMO. That, or just pull out the floor, otherwise it looks like a long slow bleed.
Mark´s last blog ..California Car Insurance
I think that they are considering another one…