California Home Buyer Tax Credit

Below is a summary of the recently enacted California Home Buyer Tax Credit

Amount of Tax Credit:???? 5% of purchase price, not to exceed $10,000 for first-time homebuyers or buyers of properties that have never been occupied.

Date of Purchase:?????????????????????? Taxpayer must enter into an enforceable contract by December 31, 2010, and close escrow between May 1, 2010 and July 31, 2011, inclusive.

Principal Residence????????? 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:?????????????????????? Single-family residence, whether detached or attached, condominium, co-op, manufactured home, mobile home, or house boat. A home constructed by the taxpayer is not eligible because the home has not been "purchased".

Eligibility:???????????????????? 1. First-Time Homebuyer: Up to $10,000 if the buyer (and buyer???s spouse/RDP if any, according to FTB) has not owned a principal residence for the three-year period before date of purchase; OR 2. Never-Occupied Property: Up to $10,000 for a principal residence if the property has never been previously occupied as certified by the seller.

Income Restriction????????????? No

Maximum Purchase Price:???????????????????? N/A

Tax Credit:?????????????????? No

Repayment:?? ???????? No repayment required if the buyer owns and occupies the property for at least two years immediately following the purchase.

Multiple Buyers (not married to each other):?? ???? Tax credit must be allocated between eligible taxpayers based on their percentage of ownership.

Maximum Credit for All Taxpayers:???????????????? $100 million for first-time homebuyers and $100 million for never-occupied properties, both on a first-come-first-served basis.

Reservations of Credit: Yes. Buyer may reserve credit before close of escrow for a property that has never been occupied by submitting a certification signed by buyer and seller stating they have entered into an enforceable contract between May 1, 2010 and December 31, 2010, inclusive.

When to Claim: ???????????????????????????? 1/3 of total tax credit may be claimed each year for 3 successive years (e.g. $3,333 for 2010, $3,333 for 2011, and $3,333 for 2012).

Tax Agency:?????????????? Franchise Tax Board (FTB).

How to File:???????????? Submit application to the FTB to obtain Certificate of Allocation. The FTB may prescribe additional rules and procedures to carry out this law.

Other Restrictions:???????????????? Cannot be an acquisition from related persons as defined; buyer or spouse must be 18 years old; buyer cannot be another taxpayer???s dependent; credit is allowed for only one qualified principal residence; credit is disallowed if taxpayer received 2009 new home tax credit; and credit allowed cannot be a business credit under Cal. Tax & Rev. Code ?? 17039.2.

Legal Authority:???????????????????????????? Cal. Rev. & Tax Code section 17059.1 (as added by Assembly Bill 183).

Date of Enactment:???????????????? March 25, 2010.

More Information:?????????????????? FTB Web site at New_Home_Credit.shtml.