A California $10,000 Tax Credit for New Home Purchases!
Thursday, February 19th, 2009
***Update – 2010 California Home Buyer Tax Credit Takes Effect 5/1/10 – Details Here***
$10,000 Tax Credit for Californians
Did you hear about the California $10,000 Tax Credit for the purchase of a newly constructed home?
The Legislature for State of California passed a revised budget plan today. Governor Schwarzenegger has promised to sign the historic legislation tomorrow. Included in this new budget is a $10,000 Tax Credit for the purchasers of a newly constructed home in the State of California. The bill is called SB 15. There are conditions to receive this Tax Credit, some of which are still being worked out. Let me tell you what we do know at this time:
1. The Tax Credit is good for 5% of the value of the newly constructed home, up to $10,000. (That would mean any home priced over $200,000 would qualify for the full credit.)
2. The Tax Credit will be available between March 1, 2009 and March 1, 2010, or when the funding authority runs out. (The Legislature has earmarked $100 million for this credit. That mean at least 10,000 new home sales. We don’t know yet if the Tax Credit will be based on when the contract for sale is written or when the escrow is closed for the purchase.)
3. The Tax Credit will be allocated by the Franchise Tax Board and will be available to new home buyers over a three year period. (Roughly one third of the Tax Credit will be available each year, details here are still being worked out.)
4. The new home purchaser must live in the home for at least two years.
5. There are no income limitations for the purchaser.
6. There is no “first time buyer” restriction.
7. There is no repayment requirement (unless the purchaser sells or rents out the home before two years have past from the close of escrow).
This is great news for California home buyers! And, if the home buyer also qualifies for the $8,000 Federal Tax Credit (see my post from February 18, 2009), then the total Tax Credit for buying a newly constructed home would be $18,000! That is $10,000 from the State of California and $8,000 from the Federal Government. Stay tuned for more details.
California Housing Tax Credit
Now, go visit a Brookfield Homes community and talk to our professional sales staff. They will be able to help you with your buying decisions and get you a great deal on a new Brookfield home!
Nice! this is incredible news for California home buyers. I like that there’s no provision limiting in to “first-time” home buyers; it will give us a chance to see if that would have been a better route for the federal tax. $18,000 is a nice extra incentive for any home buyer. Hopefully, if successful, this will set a precedent for other states like AZ, NV and FL that are in the same boat as CA.
Thanks, Steve, for spelling everything out so clearly!
Jayson,
A real tax credit for the purchase of a new home … no income limitations … no first time requirement … no repayment over time … no reason to sit on the sidelines! It is time to buy a new home!
Steve
Kathleen,
Thanks for the comment. Help us spread the word. The only limitation on this credit is that it is on a first come, first served basis, until the allocation is used.
Steve
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A link to the CA government site would surely add to the credibility of this claim.
Would this also work on homes that were build a couple years ago but never lived in???
Nicole,
The legislation says the credit will be available, so long as “… the residence has never been previously occupied.” As long as the builder did not rent out the home, I believe the credit would apply to a new home, even if it was built a couple of years ago.
Steve
Brad,
Here is a link to the Chartered Bill, SB15.
http://info.sen.ca.gov/pub/09-10/bill/sen/sb_0001-0050/sbx2_15_bill_20090220_chaptered.pdf
Steve
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Well done Steve, thank you for spreading the news. As I understand these funds are limited on a “first come first served” basis. Another reason to purchase a new built home now from a quality builder.
Regards,
Cynthia
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Cynthia,
Thanks for the comment. Please keep spreading the word. We need to get buyers back in the market and this will be a great tool to do just that!
Steve
What kind of documents will the Franchise Tax Board require to allow the credit?
Maria,
The Franchise Tax Board (FTB) will require a “certification” from the builder. The certification will require the Buyer to acknowledge their commitment to live in the home for at least two years as their principle residence and for the builder to provide certain information regarding the Buyer and the location of the home. FTB will provide the builder with the certification form.
The builder will be required to provide information directly to the FTB and the Buyer will be required to file the certification with their next annual tax report.
I will know more when the FTB form is published.
Please stay in touch with my blog. I will post additional information as it becomes available.
Steve
Will the California credit be fully refundable like the federal first time buyer tax credit or just reduce your tax liability?
John,
According to the FTB, the credit will not be refundable. That is, you must have the $3,333 of California Tax liability to utilize the full credit. And, you may not roll any unused portion forward.
Steve
is the california tax liability $3,333 you mentioned means the tax you will owe ?
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Can a model home built in 2004 but never lived in be eligible for the $10,000 tax credit if purchased in April, 2009? It was a bank owned home. The bank took it over from the builder.
Sofhia,
When you file your California State Income Tax Return and come to a line that says “tax owed”. This is your state tax liability. The credit will apply to that liability, up to $3,333 per year for the next three years. If you owe less than $3,333 in any of those three years, your credit will be limited to the amount you owe.
Steve
Donna,
That is a tough question, but I believe the answer would be yes. The key is that the home must be a “qualified principal residence”. As defined by the legislation a … “qualified principal residence means a single family residence, whether detached or attached, that has never been previously occupied, that is purchased to be the principal residence of the taxpayer for a minimum of two years and is eligible for the homeowner’s exemption under Section 218.” You can find this language at official web site for the California State Senate Bills highlighted in my post above. or at Chapter 11, Section 1 of Section 17059 of the State of California Revenue and Taxation code.
As with all tax questions, the credit availability will rely on your personal circumstances, so please confirm with your tax professional.
Steve
I am going to have $3,333 CA liability for 2009, yet if I am paying my taxes regularely by the end of the year I have a $0.00 balance. Does it mean the credit is no good to me in this scenario? I tried to speak to FTB and they are telling me if I pay my taxes during the year then no credit is applicable. What can I do to make the credit work for me? Discontinue paying CA taxes? Or, if I underpay my federal taxes, can this credit be applied to my fed tax liability?
Sergey,
I am not sure I understand your questions. First, you need to have received approval for your CA Tax Credit at the time you closed escrow on your new home. If you have that approval, when you file your 2009 State Tax Return, you will claim the Tax Credit on your Return. If you have pre-paid or had withholdings taken from your paycheck then you may not have any additional liability, but you will be entitled to a return of your prepayment or withholdings, up to $3,333 for 2009. Does this help you?
You can not use your California Tax Credit to offset a federal tax liability.
You may want to talk with your tax preparer now. If you have already paid in or had withheld more money than you estimate you will be tax liable for, another option would be to discontinue further pre-payments or withholdings. Again, your tax preparer can work through the specific numbers with you.
I hope this helps,
Steve
Nice post. Thanks
Thanks for the tax credit details, this is the most important point while purchasing home.
Arlynn,
You are welcome. Please follow along the other updates to the 2010 California Housing Tax Credit in my other posts. We have about one month left for the new home tax credit allocation. The first time home buyer tax credit is no longer accepting requests.
Steve