$10,000 Tax Credit for Home Buyers in California


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:

Reuters

Boston Herald

Expect More in a Home Blog

Money Central MSN


Subscribe to our New Homes Blog!

Most Commented Posts

About the Author

I am a Managing Partner, Internet Marketer and Blogger at New Homes Section. Follow me on Twitter or check out some articles I've submitted elsewhere online.