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As many of you know, the federal first-time home buyer tax credit of up to $8,000 is coming to an end on April 30, 2010. This extension is officially known as the “Worker, Homeownership and Business Assistance Act of 2009″ which went into effect November 6, 2009. This new law also contains a provision for a “long-time resident” credit of up to $6,500. To take advantage of either tax credit you must enter into a binding contract by April 30 and close on the purchase by June 30. Please view the following videos from the IRS in English and Spanish for more information. Additional restrictions apply, so please contact a tax professional to confirm eligibility.
On Thursday, March 25, Governor Schwarzenegger signed legislation AB 183 which extends and expands on the state tax credit approved in February 2009. It provides a tax credit of up to $10,000 to Californians buying their first home or purchasing new construction. This bill is part of the governor’s “California Jobs Initiative.” It is designed to extend $200 million in tax credit to California home buyers. $100 million to buyers of brand new homes and $100 million to first-time home buyers of existing homes. To take advantage of this tax credit, you must close on the transaction between May 1 and December 31, 2010. Please note that the state tax credit is “first-come, first-served.” They have a function in place to reserve your tax credit should you be in the middle of escrow and they are getting close to the $100 million cap. As in the federal tax credit, other restrictions apply and we recommend you speak with a tax professional to confirm eligibility.
When you look at the dates, you will notice an overlap from May 1 to June 30 of the federal tax credit and the state credit. If you open escrow on a property prior to April 30 and close on that property prior to June 30, you have the potential of an $18,000 tax credit between the federal and state plans. Please remember you must meet additional criteria to qualify. Each tax credit is paid out differently, for example, the California tax credit is paid out in three annual installments of up to $3,333 per year.
Please contact us if you have additional questions. For specific details on the federal tax credit visit the IRS website and for details on the state credit visit the California Franchise Tax Board website.