The tax credits and qualifying dates are becoming confusing! I thought it would be a good idea to write an article simplifying the matter for homebuyers who are in the market to buy a home and trying to take advantage of any and all possible tax credits.
The $8,000 Federal Homebuyer Tax Credit deadline is rapidly approaching. To qualify for this tax credit, a homebuyer must be in a ratified contract by April 30, 2010 and the transaction must close by June 30, 2010. First time homebuyers can qualify up to the full $8,000. A first time homebuyer is defined as a homebuyer who has no ownership interest in a principle residence in the last 3 years before date of purchase. ’Move-up’ homebuyers can qualify up to $6,500 as long as the buyer has lived in their home for 5 consecutive years of the last 8 years. To take advantage of the full credit in either case, the income limit for an individual is $125,000 per year and for a couple it is $225,000 per year. For certain military personnel, the credit has been extended another 12 months.
For the newly adopted $10,000 State Tax Credit for homebuyers that the Governor just implemented, this bill allocates $200 million dollars toward State tax credits for homebuyers; $100 million will be designated towards any home buyer who buys a newly built home and $100 million towards a first time homebuyer who buys a newly built or an existing home.
The tax credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under AB 183 purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit, therefore having to repay it to the state.
A first time homebuyer who closes a transaction on an existing home as a principle residence between May 1, 2010 and December, 31, 2010 will qualify for the tax credit. Buyers of new homes can reserve a credit by entering into a ratified contract between May 1 and Dec. 31, filing the proper paperwork with the tax board and closing escrow by Aug. 1, 2011.
The program is on a first come, first serve basis. Once the money runs out, the program will end, so there is no guarantee for any homebuyer until they get confirmation of their status for the credit. For qualifying for the State Tax Credit, this program is so newly implemented and I have not seen any income limits and such like the Federal Tax Credit guidelines, but you will need to refer to your tax person for all the intimate details for the actual specifications for both tax credits to confirm your own personal qualifications in the matter.
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