New California Home Buyer Tax Credit

3/24/2009

California announced it’s own, $10,000 tax credit for any homeowner buying a new home between March 1, 2009 and March 1, 2010 regardless of whether they’re a first-time buyer or not. This comes on top of the federal first-time home buyer tax credit of $8,000 announced by the Obama administration as part of the federal stimulus package. Unlike the federal bill the California home buyer tax credit does not have restrictions on income qualifications, nor do you need to be a first time buyer to participate.

Details of the California Home Buyer Tax Credit

Though greater details on the homebuyer tax credit will be forthcoming, the following provides a brief summary of what SB 15XX authorizes:

• A tax credit of up to $10,000 credit (5% of home price or $10k, whichever is less) for the purchase of a newly constructed, previously unoccupied home.
• Available March 1, 2009 and good until March 2010, or when funding authority runs out – whichever comes first ($100 million was allocated to program).
• Allocated by the state's Franchise Tax Board on a first-come, first-served basis (details still to be worked out).
• Paid out to home purchasers over three tax years in equal amounts (i.e. $3300 for 2009, $3300 for 2010, etc.) • Purchasers must reside in the home for at least two years.
• There are no income limitations that have to be met by purchasers.
• There is no first-time homebuyer requirement.
• There is no repayment requirement (unless the purchaser sells, rents out, etc before 2 years expire).

Requirements of the Credit

This tax credit is available for "qualified buyers". This is a taxpayer who purchases a single-family residence, whether detached or attached, that has never been occupied, that is purchased to be the principal residence of the taxpayer for a minimum of two years, and that is eligible for the homeowner's exemption.

The home must be a "qualified principal residence" under the new credit. A qualified principal residence must:

• Be a single-family residence, whether detached or attached.
• Never have been previously occupied.
• Be occupied by the taxpayer for a minimum of two years.
• Be eligible for the property tax homeowner's exemption.

Any of the following can qualify if it is your principal residence and is subject to property tax, whether real or personal property: a single family residence, a condominium, a unit in a cooperative project, a houseboat, a manufactured home, or a mobile home.

For over three successive tax years, the total credit allocated among owners that occupy the home must not exceed $10,000. Multiple qualified buyers that occupy the home will be allocated credit based on the amount paid and their percentage of ownership.

Any credit that reduced tax on a tax return must be repaid if the buyer does not occupy the home for at least two years immediately following the purchase date.