For California homebuyers, tax time is now tax relief time too. Thanks to two recent laws, a California homebuyer may qualify for $18,000 in tax credits for buying his or her piece of the American dream. The tax credits allow a first-time homebuyer credit up to $8,000 under federal law, up to $6500 for existing homeowners under federal law (as of 11/6/09), and a new home credit up to $10,000 under California law. Here's a quick summary of the two tax credit laws.
HOMEBUYER TAX CREDIT
FEDERAL
CALIFORNIA (funds no longer available)
Amount of Tax Credit
10% of purchase price not to exceed $8,000.
5% of purchase price, not to exceed $10,000. Maximum tax credit for all taxpayers is $100 million to be allocated on a first-come, first‑served basis.
Principal Residence
Yes. Property purchased must be the taxpayer’s principal residence which is generally the home the taxpayer lives in most of the time (26 U.S.C. § 121).
Yes. Property purchased must be a qualified principal residence and eligible for the homeowner’s exemption from property taxes (Cal. Tax & Rev. Code § 218).
Type of Property
House, condominium, townhome, manufactured home, apartment cooperative, houseboat, houstrailer, or other type of property located in the U.S.
Single-family residence, whether detached or attached, condominium, cooperative project unit, houseboat, manufactured home, or mobilehome.
First-time Homebuyer
NO. Expanded to include existing homeowners who have lived in their primary residences for five consecutive years out of the last eight years. First-time home buyers still may be eligible for a tax credit of up to $8,000, while existing homeowners may receive a credit of up to $6,500
No. The buyer need not be a first-time homebuyer.
Unoccupied Property
No. Property may have been previously occupied or not.
Yes. Property must have never been previously occupied as certified by the seller.
Minimum Occupancy Requirement
Must be the buyer’s principal residence for 36 months after purchase, otherwise credit must be repaid.
Must be the buyer’s principal residence for 2 years after purchase, otherwise credit must be repaid.
Income Restriction
Yes. Tax credit begins to phase out if modified adjusted gross income is over $125,000 for single tax filers and $225,000 for joint filers, as of 11/6/09 {fomerly $75K and $150K}).
The purchase price of the home is capped at $800,000 in both instances.
No.
Date of Purchase
January 1, 2009 to April 30, 2010
(60 day extension if binding contract in place prior to deadline).
(Note: A repayable $7,500 tax credit is available for purchases from April 9, 2008 to December 31, 2008.)
March 1, 2009 to February 28, 2010, unless $100 million funding runs out.
Refundable
Yes. Any amount of the tax credit not used to reduce the tax owed may be added to the taxpayer’s tax refund check.
No.
Repayment
The buyer need not repay the tax credit if the buyer owns and occupies the property for at least 36 months after the purchase.
The buyer need not repay the tax credit if the buyer owns and occupies the property for at least two years immediately following the purchase.
