Last year, we saw a tax incentive for California home buyers purchasing newly built homes. This tax credit was on a first come, first serve basis and the available funds were exhausted in 3 months.
Governor Schwarzenegger today signed AB 183 providing $200 million for home buyer tax credits. The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.
Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.
This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years.
Here are some important things to know:
- Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the money received (i.e. repay it to the state).
- Buyers also must be at least 18 years old and be unrelated to the seller.
- First-time buyers are defined as those who have not owned a home in the past three years.
Can there be an overlap between State and Federal Tax Incentive?
Hmm… $18,000 for buying a Pasadena house? Not a bad deal! Here’s an excerpt from a WSJ article:
For the federal incentive, contracts must be inked by April 30, while closings have to happen by June 30. The California credit covers closings on existing or new homes on or after May 1, leaving a short window for double dipping. “We already anticipated increased contract activity in March and April due to the federal tax credit with scheduled closings in May and June,” writes Credit Suisse builder analyst Dan Oppenheim. “These buyers will now be eligible for both the federal and state credit and will likely consume a significant piece of the state credit given the first-come, first-serve allocation.”
So… if you are a Pasadena home buyer and qualify for both tax incentives and have been fortunate enough to find and get acceptance on a home before April 30th, make sure that your closing date is between May 1st and June 30th.
If you are a home seller and currently have a home in escrow, be prepared for potential requests for delay in closing dates of escrows.
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PasadenaViews Real Estate Team
Pasadena Real Estate Agents
Pasadena, California
Irina at PasadenaViews.com
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Hi Irena!
I am betting that April will show a serious decline in purchase activity due to all the first time buyers delaying their closings to after May 1st. Then the May numbers will skyrocket!
That will be an “unintended consequence” of this new credit!
Hi Vicki, thanks for stopping by! You are so right… also we’ll see a lot of unhappy sellers as existing home buyers in escrow will try to delay their closing until June 1st to try and double dip. OUCH!
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