Congress has extended the closing deadline for the federal home buyer tax credit for those who have signed contracts as of April 30, but California's home buyers can still avail of another home buyer tax incentive. Buyers need to hurry because the state tax credit programs will soon reach their application limit.
California has two tax credit programs, each with a $100 million allotment. One program offers a $10,000 tax credit to first-time home buyers who purchase homes between May 1 and December 31, 2010; the second program offers a $10,000 tax credit to buyers who purchase newly-built homes after May 1, 2010 and before August 1, 2011.
"Buyers need to be aware that the funds for the state's tax credit programs are limited, that there are specific requirements for each program and that they need to act quickly to take advantage of this opportunity," said Jeff Bell, president of the Silicon Valley Association of REALTORS®.
According to the California Franchise Tax Board (FTB), as of June 29, the state already has received over 7,000 new home credit applications amounting to only $50 million of the $100 million allotment, and about 21,000 first-time buyer applications amounting to a little more than the $100 million allotment. The numbers are just estimates, according to the FTB. The board is still accepting applications because it expects a number of duplicate, revised or invalid applications will be denied.
You are eligible for the first-time buyer program if you haven't owned a home in California for three years prior to the purchase date. The property must be eligible for the California property tax homeowner's exemption, and be occupied as your principal residence for a minimum of two years immediately following the purchase. You are eligible for the new-home credit if the home you purchase is a single-family home or condo that has never been occupied. The same tax-exemption eligibility rules apply.
The state tax credits are available for buyers who purchase a qualified principal residence on or after May 1, 2010, and before January 1, 2011 (the purchase date is defined as the date escrow closes). If funds are still available, additional New Home Credit can be allocated for taxpayers who purchase a qualified principal residence on or after December 31, 2010, and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010. Those who received a new home tax credit in 2009 are ineligible to apply for the state tax credit.
Home buyers may apply for the tax credit by faxing their application no more than 14 calendar days after they close escrow. The tax credit is allocated on a first-come, first-served basis, based on the time and date the faxed application is received. The cutoff date for applications will be posted on the FTB website 24 hours prior to its going into effect, to give applicants time to fax their application.
The state tax credits are limited to the lesser of 5 percent of the purchase price or $10,000 for a qualified principal residence. Taxpayers must apply the total tax credit in equal amounts over three successive tax years (maximum of $3,333 per year) beginning with the tax year in which the home is purchased. The tax credits cannot reduce regular tax below tentative minimum tax (TMT). The tax credits are nonrefundable and unused credits cannot be carried over.
Bell recommends contacting a knowledgeable and experienced Realtor and visiting the FTB website at www.ftb.ca.gov for more information on the state tax credit programs, rules and availability of funds.
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please contact Rose Meily at SILVAR Public Affairs, email , or phone (408) 200-0109.