It is important to note, the original date for entering into a binding purchase agreement has not changed. This extension only applies to those agreements entered on or before April 30, 2010. This extension allows those specific agreements until September 30, 2010 to close escrow and hence, provide the new home owner with the opportunity to claim the “up to $8,000 or $6,500 Federal Tax Credit”.

April 30, 2010 is the last day you may execute a binding purchase agreement to qualify for the Federal Tax Credit. That purchase agreement must result in an escrow closing by June 30, 2010 to complete the requirements of eligibility for the Federal Tax Credit.

For those home buyers in California, the Tax Credit becomes available on May 1, 2010. So, if you sign your binding purchase agreement by April 30, 2010 and then close escrow by June 30, 2010, you may be eligible for BOTH the Federal and the California Tax Credits! That could be as much as $18,000 for a first time home buyer and $16,500 for a purchaser of a new home (where the buyer has owned a home for at least 3 of the previous 5 years)!

All other eligibility requirements are still in effect, so please refer to my earlier posts for the California and Federal Tax Credits to determine if your specific circumstances allow you to participate in these programs. Or, stop by a Brookfield Homes Sales Office and let one of our professional sales counselors help you understand the details.

Purchasing a new home is a big step. While affordability is at record highs in most parts of the country, the incentives offered by California and the Federal governments will not last forever. You have 15 days to act to participate in the Federal Tax Credit. It is now time to take advantage of this program!

You will recall that the Federal Tax Credit offers first time home buyers up to $8,000 and repeat buyers up to $6,500 for the purchase of a new home. Legislators have continued to repeat “there will be no further extensions of this stimulus program.”

In earlier posts, I outlined the specifics of the tax credit, but there are a couple of points you should remember. First, this is a true credit against your next year’s tax bill. A tax credit applies dollar for dollar to your tax liability. If you owe the IRS $10,000 in tax liability and you are eligible for $8,000 of tax credit, your tax liability would be reduced to $2,000!

Second, this tax credit is fully refundable. This means if you owed the IRS $5,000 on your next tax return, and you are eligible for $8,000 in tax credit, then the government would send you the difference, $3,000, as a tax refund!

And third, this tax credit is applicable to the purchase of a newly constructed home or a resale home. The government is trying to stimulate economic activity with this tax credit. And, given today’s low mortgage interest rates and low home prices, your buying power may never have been stronger. This means you can get more home for your money today.

Taken all together, now is a great time to buy a new home! But, that time is quickly slipping away. You must act now if you want to take advantage of low prices, low mortgage rates and the federal tax credit for buying a new home!

In his last State of the State address, the Governor announced his upcoming budget proposal (to be released on Friday) would include $200 million for Tax Credits to home buyers in California. Based upon the success of last year’s New Home Purchase Tax Credit, the Governor will propose to the Legislature that the purchasers of each new and resale home in California be granted up to $10,000 of State Tax Credit (within specific guidelines and time frames).

The idea for a California Home Purchase Tax Credit is driven by a number of factors. First, the incentive for providing the Tax Credit is the creation of new jobs. As highlighted by the California Building Industry Association (CBIA) a Tax Credit for the construction of each new home in the state generates up to 3 new jobs. Second, the Tax Credit has been shown to also generate up to $10,000 of new State revenues (through sales, income and property taxes) and up to $3,000 of local revenue (through sales and property taxes). And third, the Tax Credit also helps stabilize neighbor home prices through increased demand and sales activity.

A new twist on the proposal this year is the provision to utilize the Tax Credit for resale home purchases. This change follows the recent Federal Housing Tax Credit extension plan, which opened up the Federal Tax Credit to any purchaser of a home, not just to first time home buyers.

A number of issues will need to be worked out with the Governor’s proposal. For example, it is likely that the new State Tax Credit will follow the guidelines utilized by the 2009 Housing Tax Credit, requiring the credit amount to be spread over three years and limiting the credit amount to the amount of state tax owed by the home buyer, not to exceed $3,333 per year. Additionally, by placing a limit on the Tax Credit allocation of $200 million and opening the Tax Credit eligibility to resale and new home buyers, the Franchise Tax Board (FTB) will need to create a program allowing prospective home buyers to reserve an allocation of the limited Tax Credits at the time a purchase contract is signed for the home sale. There may also need to be a division of the Tax Credit allocation between new and resale home buyers, as the resale homes will be more available and will dominate the sales activity in the early weeks of the Tax Credit life. While this may sound like a “so what?” to most people, the job creation aspect of the stimulus provided by a Tax Credit will not achieved if only a small number of new homes buyers are able to take part in the program.

And, finally, remember this is a proposal. The Governor can not make the law, he can only approve a law drafted by the Legislature. The Governor’s budget proposal contains the provision for a Housing Tax Credit. The Administration will need to work with the State Senate and Assembly to craft the language, the rules and the “where as-es” to draft a Bill that creates a Tax Credit for California home buyers. As they say … “the devil is in the details”. Stay tuned as the adventure begins again!

First time home buyers will be eligible for the Federal Tax Credit if they meet the criteria of the original Tax Credit legislation, namely:

1. An income limitation of $75,000 for a single purchaser or $150,000 for a couple.

2. The Tax Credit is limited to 10% of the purchase price of the home or $8,000, whichever is less.

3. The purchaser must be a first time home owner and the residence must be their principle residence.

For the new Move-up home buyer the criteria is similar:

1. You must have owned your current home for 5 or more years.

2. The income limitations are $125,000 for a single or $250,000 for a couple, but above those limits the $6,500 Tax Credit may be available on a phase out basis.

3. The home must be your principle residence and may be priced up to $800,000.

For both groups, the Tax Credit will be available to those purchasers who sign a contract to purchase by April 30, 2010 and close escrow no later than June 30, 2010. (The credit may be extended for up to 12 months for purchasers who are serving in the military outside the United States for at least 90 days. Further clarification on this provision will be forth coming.)

Senator Johnny Isakson (R-Ga) believes this will be the last Tax Credit extension for home buyers. If you are interested in your first new home or would like to move-up to a new home, now is the time to be buying. The Federal Tax Credit is being given a one time extension … think of it as a great Christmas present!