So yes, you probably saw on the news that Governor Schwarzenegger signed AB 183, allocating approximately $200 million for home buyer tax credits. The bill allocates $100 million for qualified first-time home buyers of existing (resale, previously occupied) homes, and $100 million for purchasers of new construction (previously unoccupied) homes. Again, the definition of a first time buyer is one that has not owned a home in the last 3 years.
The State of California tax credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. In english – if you purchased a $165,000 home, you would be eligible for a tax credit of $8,250 ($165,000 x 5% = $8,250, which is less than $10,000). If you purchase a $265,000 home, you would be eligible for a tax credit of $10,000 ($265,000 x 5% = $13,250, however the tax credit is capped at $10,000).
The eligible taxpayer who closes escrow on a qualified principal residence between May 1, 2010 and December, 31, 2010, or who closes escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credits. Of course – these time periods assume that the state allocated funds will not be depleted…AND, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (aka, you would have to repay it to the state). AND, you must submit an application for the tax credit…the state of California does take reservations…so don’t wait for tax season. No joke!