As buyers who have been sitting on the fence or were not able to get an offer accepted in this hot REO market here in the Lancaster / Palmdale area are watching the clock run down on the Federal First-Time Home Buyer tax credit, the State of California has stepped in to fill the gap.
To have qualified for the Federal First-Time Home Buyer tax credit you would have had to had an accepted contract and opened escrow before April 30th, 2010. As market trends have been showing us, many buyers jumped in the frey here in Palmdale and Lancaster to meet that deadline. However, there are some buyers that have been waiting for the predicted flood of new REO / Bank-Owned properties to hit the market and see how they affect prices and there are even more buyers that have been trying to buy a home in Palmdale or Lancaster that have run into the problem we have here of low REO inventory making it hard to get an offer accepted because of the multiple offers running bids up over asking prices.
If you fit into one of these categories, then don’t fear! The Governator signed a bill that will go into affect the day AFTER the Federal Tax Credit goes away. On May 1st, 2010, the California First-Time Home Buyer and New-Home Buyer tax credit goes into effect.
HOW DOES THE NEW CALIFORNIA TAX CREDIT WORK?
Basically, for either credit, the State of California will credit the first-time buyer or new-home buyer 5% of the sales price up to $10,000 towards their tax liability. This credit is spread out over a three year period. In other words, if you purchase a home for $180,000 (easy to do here in the Palmdale / Lancaster area!) you would qualify for a tax credit of $9,000. When you file your taxes for 2010, 2011, and 2012 you would receieve a $3,000 credit towards your tax liability.
Note that if you do not have a tax liability for those years the State of California will NOT give you a refund based on this credit. In other words, if you only owe $1,500 in taxes for 2010 you will only receive a $1,500 dollar credit … the State will not zero out your liability and then give you a $1,500 refund.
Here is a quick run-down of what you need to do to qualify for one of these new California tax credits …
CALIFORNIA FIRST-TIME HOME BUYER TAX CREDIT QUALIFICATION
A qualified principal residence, for purposes of the First-Time Buyer Credit, must:
- Be a single family residence, either detached or attached. This can be a single family residence, a condominium, a unit in a cooperative project, a house boat, a manufactured home, or a mobile home. A home constructed by the taxpayer is not eligible since the home has not been “purchased.”
- Be eligible for the California property tax homeowner’s exemption.
- Be occupied by the taxpayer as their principal residence for a minimum of 2 years immediately following the purchase.
- A first-time buyer is any individual (and the individual’s spouse/RDP, if married on the date of purchase) who did not have an ownership interest in a principal residence, either in or out of California, during the preceding 3 year period ending on the date of the purchase of the qualified principal residence. 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.
CALIFORNIA NEW-HOME BUYER TAX CREDIT QUALIFICATION
A qualified principal residence, for purposes of the New Home Credit, must:
- Be a single family residence, either detached or attached. This can be a single family residence, a condominium, a unit in a cooperative project, a house boat, a manufactured home, or a mobile home. A home constructed by the taxpayer is not eligible since the home has not been “purchased.”
- Have never been occupied. Sellers must certify that the home has never been occupied in order for a taxpayer to receive an allocation of the credit.
- Be eligible for the California property tax homeowner’s exemption.
- Be occupied by the taxpayer as their principal residence for a minimum of 2 years immediately following the purchase.
For more information and instructions on how to claim your tax credit, please see the official announcement from the California Franchise Tax Board.
{ 4 comments… read them below or add one }
You written here good article for those people who interested to buy a home in first time. It is time to hurry who interested the buy a home. because 9 days only left.If you are eligible for HBTC or not. The HBTC is calculated by multiplying the lowest personal income tax rate for the year (15% in 2009) by $5,000. For 2009, the credit will be $750. you take the benefit in this year.
First I would like to say it's how nice it is to see an Antelope Valley real estate blog. It looks great. On the subject at hand, I think the $8,000 tax credit did the economy a whole lot of good by selling the surplus of homes coming on the market since foreclosures started. Now that California has jumped in to help maintain the balance between supply and demand with their own incentive, I feel confident that market is going to keep getting better.
Because of the many legal and tax situations that can arise through the sale and purchase of real estate always consult with your attorney or accountant before making any decisions in any transaction.