Long Beach, Ca.  There has been a lot of confusion in the marketplace about what are the exact tax credits that a home buyer may receive from both the State of California and the Federal government.   Chuck Barger, of Prudential California Realty, has prepared the simply summary below which makes is very easy to understand.  If you are a homebuyer, this makes buying a property even more attractive this year!  If you are an agent, you should be screaming this from the roof tops!  Everyone benefits from  tax  credits, and you might just qualify for both of to $18,000.00 in credits.

             I.      Federal Tax Credit

1.      Credit is 10% of Purchase Price, not to exceed $8,000.

2.      Escrow must close between January 1, 2009 to November 30, 2009, inclusive.

3.      Federal Credit is a “Refundable-Credit” earned whether or not taxpayer owes Federal Tax. Example, home-buyer owes zero Federal Tax, would receive a tax “refund” of $8,000.

4.      Credit does not have to be repaid to Government, unless home-buyer sells or moves to another principle residence within THREE years of purchase.

5.      Home-buyer is “First-Time” or has not owned a home from July 1, 2006 to June 30, 2009. Must be Owner Occupied as Principle Residence.

6.      Income Levels: Tax Credit starts to phase out for an Individual Taxpayer with a modified adjusted gross income from $75,001 to $95,000 (or $150,001 to $170,000 for joint filers). The credit is eliminated entirely for an individual over $95,000; jointly $170,000.

7.      Taxpayer can claim credit for either tax year 2008 or tax year 2009. If 2008 returns already filed, taxpayer can file an amended return and receive tax “refund”. Use IRS form 5405.

8.      If Escrow closed from April 9, 2008 to December 31, 2008, would fall under 2008 law.

          II.      State of California Tax Credit

1.      5% of purchase price, not to exceed $10,000

2.      Escrow must close between March 1, 2009 to February 28, 2010

3.      Property must be “New Home”; that is, must be certified that the home has never been occupied; single family residence only.

4.      Must be Owner Occupied as Principle Residence; must reside in home for TWO YEARS minimum to avoid paying back State Tax Credit.

5.      Tax Credit is NON-REFUNDABLE; that is, it must be taken as an offset against State Taxes owing. It is taken over THREE successive taxable years. Starting in 2009 or 2010- maximum credit is $3,333 per year.

6.      Home-buyer does not have to be a First-Time buyer to receive State Tax Credit.

7.      Income Levels- no maximum income levels.

8.       Tax Credit year begins in 2009 or 2010, depending on escrow closing date; use form FTB 3582A.

Summary: Credit may not be given if buying from relative or as gift. Home-buyer can receive BOTH credits. Time is of essence; must close within deadlines.

Kirk Mulhearn, a Long Beach Real Estate Broker co-manages Prudential California Realty, "The Bixby Knolls Office," and a Net Branch of, GEM Mortgage, a direct lender specializing in FHA, VA, and Conventional financing.  Contact him at:  562-989-4608 ext. 110

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