The New Tax Credit Explained – Time is Running Out!

Posted March 31st, 2010

If you are considering buying or selling a home priced at $800,000 or less, government stimulus efforts will be at their peak over the next 30 days.

With tax credit incentives totaling as much as $18,000, many buyers in that price range will be extraordinarily motivated to be under contract and in escrow by April 30, 2010.  (Buyers who open escrow by April 30, 2010 may be eligible for both the Federal tax credit of $8000 and the California tax credit of $10,000.)

Here are some links with details regarding these credits:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/03/27/BU1U1CLQBH.DTL

http://www.irs.gov/newsroom/article/0,,id=215791,00.html

http://www.leginfo.ca.gov/pub/09-10/bill/asm/ab_0151-0200/ab_183_bill_20100325_chaptered.html

California

Federal
Timing AB 183:  First-time homebuyers are eligible who “purchase a qualified principal residence on or after May 1, 2010.”

“A qualified principal residence is purchased on the date on which escrow closes.”

For new construction (a principal residence that “has never been occupied”, Buyer/Taxpayer and seller must sign and submit to FTB a certification that they have entered into an enforceable contract on or after May 1, 2010 and on or before December 31, 2010.

Buyer/Taxpayer must subsequently submit (within two weeks after the date of purchase/closing) a copy of the settlement statement and certifications under penalty of perjury regarding taxpayer’s eligibility.

 Escrow must open by April 30, 2010 and close by June 30, 2010.
First-Time Home Buyer 5% of purchase price up to a maximum of $10,000, apportioned over three tax years

First-come first served until the $100 million is gone.

 Up to $8,000, as credit or refund from the buyer’s 2010 tax return.

Amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $125,000, or $225,000 for joint filers.

Those with incomes higher than $145,000 (single) or $245,000 (joint) do not qualify.

No credit is available if the purchase price of a home is more than $800,000
New Construction 5% of purchase price up to a maximum of $10,000, apportioned over three tax years.

First-come first served until the $100 million is gone.

(If buyer is first-time homebuyer and property has never been occupied, the credit will come out of the “never occupied” pool.)

 None.

Parties with questions concerning these tax credits (or buyer eligibility) should of course consult with their CPA or other tax advisor.

If you do determine that now is the time to buy or sell, we are ready to serve you.