- Published on Tuesday, 07 December 2010 16:00
- Written by Town Crier Report
The window is closing for prospective California homebuyers to apply for a state tax credit. Earlier this year, legislators created two state tax-credit programs, each allotted $100 million.
As of last week, one of the programs received more applications for tax credits than funded, lowering, but not eliminating, the possibility of more first-time homebuyer credit allocations being issued.
The first state tax-credit program offers a $10,000 credit to first-time homebuyers who purchase homes between May 1 and Dec. 31. The second offers a $10,000 tax credit to buyers who purchase newly built homes after May 1 and before Aug. 1.
“Buyers need to be aware that the funds for the state’s tax-credit programs are limited, that there are specific requirements for each program and that they need to act quickly to take advantage of this opportunity,” said Jeff Bell, president of the Silicon Valley Association of Realtors.
According to the California Franchise Tax Board (FTB), as of June 29, the state has received more than 7,000 new-home credit applications, amounting to only $50 million of the $100 million allotment, and approximately 21,000 first-time buyer applications, amounting to slightly more than the $100 million allotment.
The numbers are estimates, according to the FTB. The board is still accepting applications, because it expects that a number of duplicate, revised or invalid applications will be denied.
Buyers are eligible for the first-time buyer program if they haven’t owned a home in California for three years prior to the purchase date. The property must be eligible for the California property-tax homeowner’s exemption and occupied as the principal residence for a minimum of two years immediately following the purchase.
Buyers are eligible for the new-home credit if the home they purchase is a single-family home or condo that has never been occupied. The same tax-exemption eligibility rules apply.
The state tax credits are available for buyers who purchase a qualified principal residence on or after May 1 and before Jan. 1 – the purchase date is defined as the date escrow closes. If funds are still available, additional credit can be allocated for taxpayers who purchase a qualified principal residence on or after Dec. 31 and before Aug. 1, pursuant to an enforceable contract executed on or before Dec. 31. Those who received a new-home tax credit in 2009 are ineligible to apply for the state-tax credit.
Homebuyers may apply for the credit by faxing applications no more than 14 calendar days after escrow closes. The tax credit is allocated on a first-come, first-served basis, based on the time and date the faxed application is received. The cutoff date for applications will be posted on the FTB Web site 24 hours prior to going into effect, to give applicants time to fax their applications.
State 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 three successive tax years – with a maximum of $3,333 per year – beginning with the tax year in which the home is purchased.
Tax credits cannot reduce regular tax below the tentative minimum tax. The tax credits are nonrefundable, and unused credits cannot be carried over.
For more information, visit www.ftb.ca.gov.