Mathews Associates

"Building Lifestyles for Life"

California Legislature Approves New Homebuyer Tax Credit

Posted by Dwight Mathews on April 1, 2010

Thursday, Gov. Schwarzenegger signed an extended and expanded homebuyer,  State tax credit.  The new credit will take effect May 1, one day after the federal homebuyer tax credit is set to expire.

The State tax credit sets aside $200 million in tax credits for buyers of both newly constructed homes and first-time buyers of existing homes.

Home buyers can claim up to $10,000. or 5 percent of the home price, whichever is less for the purchase of a newly constructed home, which will be paid out over three years.  Buyers must live in the home for at least two years and there are no income requirements.

The tax credit will only be available until the end of the year or until the funding is exhausted.  Last year, in 2009, monies disappeared quickly.

The California Builders Association and other state leaders have pushed for the new tax credit to hopefully, once again, jump start the real estate market and the economy.

SUMMARY:

The California credit is the lesser of 5 percent of the purchase price or $10,000.  First time buyers can purchase a new or existing home but repeat buyers can only purchase a new home that has never been occupied.  The Credit is spread out over 3yrs, up to $3,333. per year.  It is not refundable!  If you owe income taxes less than $3,333 in one (or more) of those years, you lose the difference that year. Note!  A Tax Credit is actually a dollar for dollar reduction against any income taxes owed.  If you owed $3,333 before you owned a house, you might owe less after because of all the new tax deductions one can take in the year of purchase.

To get the California credit, you must close escrow between May 1st and either Dec. 31 or whenever the money for the program runs out, whichever comes first.  The money is likely to run out long before Dec. 31, 2010.  Also, the credit is available for new construction by entering into a binding contract by Dec. 31. However, you have until Aug 1st, 2011 to close escrow.

CONCLUSION:

If you are pre-approved for a mortgage and are in a financial position to move quickly, then you seriously need to do so.  One final note?  This isn’t the time to start looking for a foreclosure, short sale or bank owned home because you, and your buyer agent have absolutely no control over the offer or the closing date. However, if you have already done your homework and you have your eye on a home or investment property that is a short sale or reo then you need to get your offer on the table as quickly as possible in order to take advantage of what will most certainly be the last tax credit buyers will ever see. Please, call my office or send me an email so we can discuss your individual real estate and financial needs.  “HIRE ONE FOR YOUR SIDE”



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