Today Governor Arnold Schwarzenegger signed Assembly Bill 183(CA Homebuyer Tax Credit) into law. The new law is really an extension of the old California tax credit bill from 2009 that was so popular that it was out of funds a few months after it was passed. For a State that claims to be broke the bill allocates a large chunk of channge....$200,000,000 for the credit. The total allocation of $200,000,000 in tax credits is divided between first time home buyers( people who haven't owned a home for 3 years) and purchasers of homes that have never been lived in (new homes). Each category has $100,000,000 available until the credit runs out... which might be very soon judging by how quick funds dried up last year.
A brief outline of the bill:
1. The purchase of a qualifying residence must occur (close escrow) on or after May 1, 2010 or before December 31, 2010, or after December 31,2010 and before August 1, 2011, subject to specified restrictions. ( I believe this refers to new construction that was purchased prior to December 31, 2010 but not completed until later)
2. The amount of the tax credit is the lesser of 5% of the purchase price or $10,000. However as in the 2009 version there doesn't appear to be either an income or purchase price limit. So first time buyers in the Beach Cities or folks buying new construction.. no matter what the price... qualify for the credit. This has to make the folks at 360 South Bay very happy.
3. Only one credit will be issued to a first time home buyer that buys a new home. So if you bought a new home last year you don't get the credit again this year.
4. A “qualified principal residence” is an attached or detached home that will be used as the principal residence of the purchaser, is eligible for the homeowner's exemption under Section 218, and has either never been occupied, or is purchased by a first time home buyer.
5. A “first time home buyer” is and individual, or individual's spouse, who has no present ownership interest in a principal residence during the preceding three year period, as of the date of purchase.
6. The tax credit is paid over a 3 year period. You have to occupy the qualifying residence for at least 2 years immediately after the purchase. The tax credit is non-refundable, so if you don't actually use it during the specified time, you lose the credit and any credits you have taken will be recaptured.
7. You can reserve a credit prior to close of escrow. If you wait to apply after the escrow closes you must apply for the credit within 2 weeks of closing or lose it.
As a little bonus.. if you qualify for the Federal tax credit and are under contract by 4/30/2010 and close by 6/30/2010 you could likely get $18,000 as a credit from the Feds and the State if escrow closed after May 1, 2010... not a bad deal if you can get it....
Click for the full text of the bill... AB183
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