What You Need To Know About The New California State Tax Credit
March 31st, 2010 Categories: Homebuyer Tax Credit, Mortgage News
Last year, the State of California earmarked $100mil for a tax credit available to purchasers of newly constructed homes. This money was used up in just over 3 months. Fortunately, the State passed bill AB 183 last week with another $100mil for this purpose as well as an additional $100mil for 1st Time Home Buyers. The CA Franchise Tax Board will have the official posting on their website by tonight. Here are the some of the details:
Newly Constructed Homes $100mil pool of money:
- Property cannot have been previously occupied
- Qualified purchases from 5/1/2010 to 12/31/2010
- Property must be considered primary residence and must be occupied for at least the first two years or money is due back to the State
- Tax credit is up to 5% of the sales price or $10,000 whichever is less
- First come first served basis, tax credit is not guaranteed
- Tax credit is allocated over three years and is “use it or lose it”
First Time Home Buyer $100mil pool of money:
- No homeownership within the past three years
- Qualified purchases from 5/1/2010 to 7/31/2010
- Property must be considered primary residence and must be occupied for at least the first two years or money is due back to the State
- Tax credit is up to 5% of the sales price or $10,000 whichever is less
- First come first served basis, tax credit is not guaranteed
- Tax credit is allocated over three years and is “use it or lose it”
If a buyer is both a 1st timer and purchasing new construction, then that money will come out of the Newly Constructed Homes pool of money. Please remember that this tax credit is non-refundable meaning that it is only used to offset taxes owed. Qualified buyers will never receive more money back that what they paid in, unlike the Federal 1st Time Buyer credit.
For example, let’s say a buyer had $3,000 withheld for state taxes, but only owed $1,000 based on their income after deductions. Normally, they would receive a refund of $2,000. The state tax credit would offset the $1,000 owed, therefore giving the buyer a refund of the full $3,000 that was withheld.
This works differently than the Federal 1st Time Buyer credit which would allow the buyer to not only receive the $2,000 refund, but also an additional $8,000 (or whatever portion of the tax credit for which they qualify). As always, please consult a tax professional for more specifics.
Remember, last year’s money went very quickly so it is anticipated that this year’s allotment will go just as fast. Also, keep in mind that buyers must register for this credit, details will be available on the Franchise Tax Board site by tonight.
See The Franchise Tax Board’s Update: http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml
For More Information Please Contact:
Kevin Kueneke
Sr. Loan Consultant, Direct Lender
Primary Residential Mortgage, Inc.
1000 Aviara Parkway, Suite 110 | Carlsbad | CA | 92011
Phone 760-500-1919 | Fax 619-419-2324
www.primaryresidentialmortgage.com | kkueneke@primeres.com
