CA New Home Buyers - Now's the Time

The CA New Home Tax Credit is winding down.  If you're in the shopping process, now is the time to make a decision.  Nearly 16,000 reservations have already been received totaling $103,000,000.  But, don't be discouraged, many of these applications have "fallen out" or been duplicates, therefore the Franchise Tax Board (FTB) intends to take an additional 24,000 applications.

California New Home Tax Credit:

If you missed the earlier hoopla about the new home tax credit offered by the State of California for new home buyers, the 100 million is starting to wind down. These tax credits are limited to the lesser of 5 percent of the purchase price or $10,000 for a qualified principal residence.

Taxpayers must apply the total tax credit in equal amounts over 3 successive tax years (maximum of $3,333 per year) beginning with the tax year in which the home is purchased. The tax credits cannot reduce regular tax below tentative minimum tax (TMT). The tax credits are non-refundable, and unused credits cannot be carried over.

Taxpayers will not be eligible for the tax credit if any of the following apply:

• The taxpayer was allowed a 2009 New Home Credit.
• The taxpayer is under 18 years old. (A taxpayer who is married as of the date of purchase will be considered to be 18 if the spouse/registered domestic partner (RDP) of the taxpayer is 18 or older on the date of purchase.)
• The taxpayer or the taxpayer's spouse/RDP is related to the seller.
• The taxpayer qualifies as a dependent of any other taxpayer for the tax year of the purchase.

New Home Credit: A qualified principal residence, for purposes of the New Home Credit, must:

• Be a single family residence, either detached or attached. This can be a single family residence, a condominium, a unit in a cooperative project, a house boat, a manufactured home, or a mobile home. A home constructed by the taxpayer is not eligible since the home has not been "purchased."
• Have never been occupied. Sellers must certify that the home has never been occupied in order for a taxpayer to receive an allocation of the credit.
• Be eligible for the California property tax homeowner's exemption.
• Be occupied by the taxpayer as their principal residence for a minimum of 2 years immediately following the purchase.

Tax Credit Reservation:

• Extremely important as the funds start winding down..
• a reservation will "hold the taxpayer's place in line" until 2 weeks after escrow closes.
• Make request a reservation prior to the close of escrow.
• Taxpayers may only request a reservation if they have entered into an enforceable contract on or after May 1, 2010, and on or before December 31, 2010.
• Reservations must be canceled IF the purchase is canceled.  The Buyer must notify FTB.
• A property change, would require a new reservation.

Requesting or receiving a reservation does not guarantee the credit.

An application must still be completed and faxed to FTB along with the final settlement statement within two weeks after the close of escrow. 

Click here for more information and the Franchise Tax web site.

As always, you comments are appreciated.