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Thursday, April 1, 2010

Timing is everything!

Governor Arnold Schwarzenegger signed legislation AB 183 to extend and expand the homebuyer tax credit. Authored by Assembly member Anna Caballero (D-Salinas) and Senator Roy Ashburn (R-Bakersfield), this tax credit will provide up to $10,000 to Californians who are buying their first home or purchasing a brand new home.

This legislation, part of the Governor’s larger California Jobs Initiative, will play a key role in getting our economy moving again by encouraging home ownership and stimulating job creation.

Governor Arnold Schwarzenegger stated:

“I have been up and down the state pushing this important housing bill that will get people off the fence and into homes… “

Some home buyers in California could get both federal and state tax credits worth up to $18,000 if they time their purchase just right over the next three months.

Want Both?

• Both credits require you to buy the home as your primary residence.
• Both define a first-time buyer as someone who has not owned a home in the three years prior to purchase.
To get both credits you must be in contract on or before April 30 and close between May 1 and June 30 - and meet all other requirements. For more information contact info@pclofts.com
• Buyers who are already in contract and want to postpone their closing need to get the seller and lender to agree.

Federal credit:

• The credit is 10 percent of the purchase price,
• up to a maximum credit of $8,000 for first-time home buyers or
• $6,500 for longtime homeowners who buy a replacement home.
• Either type of buyer can purchase a new or existing home.
• Buyers will be able to claim the federal credit when they file their tax return (or amend the prior year's return).
• This credit is refundable: The full amount will be paid out, even if you have zero federal tax liability or the credit is bigger than your federal tax.
• You cannot get the federal credit if your income is too high or the home was purchased after Nov. 6, 2009, and cost more than $800,000.

State credit:

• The credit is the lesser of 5 percent of the purchase price or $10,000.
• First-time buyers can purchase a new or existing home but repeat buyers can only purchase a new home that has never been occupied.
• The California credit is spread over three years, up to $3,333 per year.
• It is not refundable: If you owe less than $3,333 in one (or more) of those years, you lose the difference that year. Even if you owed $3,333 before you owned a house, you might owe less after because of all the new tax deductions.
• No income or purchase-price limits. Buyers who fall below the income limits for the federal credit might not owe enough California tax to get the full benefit of the state credit.
• You must close escrow between May 1 and either Dec. 31 or whenever the money set aside for the program runs out, whichever comes first.
• The money is likely to run out long before Dec. 31.
• You can reserve a state credit for new construction by entering into a binding contract between May 1 and Dec. 31 and closing before Aug. 1, 2011. People who do this won't get the federal credit because they entered a contract after April 30.

Buyers should consult a well-informed tax person and make sure they understand both credits.



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