Special Tax Incentives for California Home Buyers create a special opportunity. However, these incentives will not last forever.
A common question usually begins, “Is Now A Good Time To Buy“? The answer to that question is it usually depends. Buying a home is a decision based upon several factors, the least of which is an attempt to time the market. If you have been considering the purchase of real estate and reside in California, the wind appears to be at your back at least for a short time.
Now is a great time to take advantage of First Time Buyer Incentives
Federal Tax Credit
If you are a first time home buyer and enter a binding contract by April 30 and close escrow by July 1, 2010 (and meet the income limits) you may qualify for the full $8000 tax credit. This credit is available on homes that cost $800,000 or less and does not require repayment if you live in the house for 3 years or more. The credit is actually 10% of the sales price or $8000, whichever is less.
According to the California Association of Realtor Magazine, the income limits for single taxpayers is $125,000 and for married taxpayers filling a joint return $225,000. A first time home buyer is defined as a person who has not owned a principal residence three years prior to the purchase. For married taxpayers it applies to the home ownership history of both spouses.
If you are an existing homeowner you may be entitled up to a $6500 credit. You must have lived in your home for 5 of the last 8 years and have a binding contract by April 30 and close escrow before July 1, 2010.
California First Time Buyer Incentive
A few days ago Governor Schwarzenegger signed into law AB 183 “Homebuyer Tax Credit” into law. The bill provides up to $100 million for qualified first time home buyers of existing homes and $100 million of tax credits for purchasers of new or previously unoccupied homes. Eligibility is defined as a:
taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).
The State of California offered a similar program last year , however it only applied to new or previously unoccupied construction and was so popular it ran out of money before the program was set to expire.
The California Bonus
These two programs provide a very small window of overlapping opportunity. If you meet the “first time buyer” qualifications, apparently you can earn the maximum of the two programs or $18,000 if your transaction closes between May 1, 2010 and July 1, 2010. With interest rates at very desirable levels and up to $18,000 available in incentives ask yourself, “Is there a better time to buy”?
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(Note: This is not intended to be interpreted as legal or tax advice. You must check with the appropriate professional such as an Attorney or CPA, to determine if this will apply to your personal situation)
About Doug Willis
Thanks for putting the list together! I always thought the Federal tax credit was only for *new* homebuyers and that existing homebuyers were out of the picture. I guess another tip would be to not wait to long to take advantage of these deals, since they could run out of money soon, like the CA First Buyer Incentive one had in the past.
With so many new programs in real estate , it’s hard to keep up with them all.
The CA Franchise Tax Board says it’s the date that escrow closes, not the contract date that qualifies for the California tax credit, which means it is possible to qualify for both Sate and Federal tax credits if a purchase contract is signed by the end of April and escrow closes by the end of June.
http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml: “The New Home / First-Time Buyer Credits are available only for purchases that close escrow on or after May 1, 2010.”
Is there any income limit for CA tax credit? (like the federal one does)
We are not seeing a rush for the tax credit in Bend Oregon the way I thought we would. Looks like good time to buy in your area.