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