Homebuyer Tax Credit Overview

California Association of Realtors 2010 Tax Credit Chart

CALIFORNIA has initiated its own homebuyer tax credit. Keep in mind that this credit is on a first-come, first served basis. When the funds run out, so does your ability to receive the credit!

The credit is for 5% of the purchase price, with a maximum credit of $10,000. That’s a dollar-for-dollar reduction against income tax payments that would otherwise be due. Homebuyers must claim the tax credit in equal installments over three consecutive years, beginning with the year of purchase. Purchasers are required to live in the home as their primary residence for two years or forfeit the credit.

To be eligible, first-time homebuyers can purchase a new or existing home. Repeat or move-up homebuyers are eligible for the credit only if they buy a new home.

Buyers of existing homes must close escrow between May 1 and December 31, 2010. The credit is available to buyers of new homes who sign purchase agreements between May 1 and December 31, and close escrow by August 1, 2011.

Unfortunately, time has essentially run out on the FEDERAL Homebuyer Tax Credit. The tax credit was available to buyers who sign purchase agreements on a new or existing primary residence home between December 1, 2009, and April 30, 2010. Buyers have until June 30 to close the mortgage loan on their new home. (PLEASE SEE BELOW FOR THE LATEST NEWS)

According to the National Association of Realtors as reported on June 30, 2010, Congress has passed an extension of the Homebuyer Tax Credit closing deadline, the Homebuyer Assistance and Improvement Act (H.R. 5623). The extension applies only to transactions that have ratified contracts in place as of April 30, 2010 that have not yet closed. The legislation is designed to create a seamless extension. The new closing deadline for eligible transactions is September 30, 2010. There will be no gap between June 30 and the date the President signs the bill into law. If you have any questions about how the California or Federal Tax Credit may you, please call me today.

THE ABOVE CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND SHOULD NOT BE USED AS A SUBSTITUTE FOR CONSULTATION WITH A TAX ADVISOR.