New Tax Credit Rewards Buyers on First Come First Served Basis
Bay Area homebuyers will be pleased to learn of the new income tax credit signed into law by Governor Schwarzenegger on March 25, 2010. Assembly Bill 183 offers a tax credit of up to $10,000 for approved first-time homebuyers or buyers interested in purchasing a home that has never been occupied. The new credit’s implementation coincides with the existing $8,000 federal tax credit’s pending expiration. The new AB 183 credit is offered to qualified purchases closing between May 1, 2010 and August 1, 2011, on contracts fully ratified no later than December 31, 2010. The expiring federal tax credit applies to contracts signed by April 30 that close no later than June 30, 2010. Lucky buyers with contracts ratified by April 30 and whose escrows close by June 30, 2010 may be eligible for a combined credit of up to $18,000.
AB 183 offers approved first-time homebuyers or buyers of previously never occupied homes a credit of 5% of a purchase price or $10,000, whichever sum is lowest, taken in equal installments over three years beginning on the year of purchase. The home must be a qualified principal residence and the buyer must remain in the home for a minimum of two years. Qualified first-time homebuyers include anyone 18 years or older who has not owned a primary residence for three years. Qualified principal residences are single family attached or detached homes, purchased as the primary residence of the buyer.
First Come, First Served
Up to $200,000,000 is being offered on a first-come, first-served basis, with $100 million allocated to buyers of new, never-occupied homes and $100 million offered to first-time buyers of existing homes. A similar credit of $100 million offered in February 2009 was fully allocated within just 4 months, so the early bird gets the worm.
The tax break must be certified and evidence must be presented to the state Franchise Tax Board within two weeks of close of escrow. Although not required, taxpayers may reserve a credit prior to close of escrow. To reserve a credit both the buyer and seller must submit to the FTB certification that they have entered into an enforceable contract. Upon receipt of the joint certification, the buyer will be notified that their credit has been reserved, pending delivery of required information that is to be provided to the FTB within two weeks of close of escrow. Within two weeks of close of escrow, the FTB must be provided with either certification by the seller that the buyer’s new principal residence has never been occupied or certification from the taxpayer that he or she is a first-time homebuyer and the home will be their principal residence.
Nicholas Ballard is both a mortgage broker and banker specialized in the residential Marin market. For assistance, please call or e-mail:
Nicholas Ballard: 415-526-1941; [email protected]
Real Estate Financing
CA Dept. of Real Estate #01356374
California Mortgage Advisors, Inc.
CA Dept. of Real Estate #01170868
Redwood Highway, San Rafael 94903