>To help stimulate home sales, both the federal and state governments are offering tax credits for Californians purchasing their piece of the American dream. Federal law offers up to $8,000 for first-time homebuyers and $6,500 for long-time residents.
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HOMEBUYER TAX CREDIT
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FEDERAL
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Amount of Tax Credit
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10% of purchase price not to exceed $8,000 for First-Time Homebuyers or $6,500 for Long-Term Residents.
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5% of purchase price, not to exceed $10,000 for first-time homebuyers or buyers of properties that have never been occupied. (See also Maximum Credit for All Taxpayers.)
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Date of Purchase
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By June 30, 2010, but taxpayer must enter into a written binding contract by April 30, 2010.
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From May 1, 2010 to July 31, 2011, but an enforceable contract must be executed by December 31, 2010.
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Principal Residence
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Yes. Property purchased must be the taxpayer’s principal residence which is generally the home the taxpayer lives in most of the time (26 U.S.C. § 121).
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Yes. Property purchased must be a qualified principal residence and eligible for the homeowner’s exemption from property taxes (Cal. Tax & Rev. Code § 218).
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Type of Property
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House, condominium, townhome, manufactured home, apartment cooperative, houseboat, house trailer, or other type of property located in the
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Single-family residence, whether detached or attached.
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Eligibility
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1. First-Time Homebuyer: Up to $8,000 if buyer (and buyer’s spouse if any) has not owned a principal residence during the three-year period before date of purchase; OR 2. Long-Time Resident: Up to $6,500 if buyer (and buyer’s spouse if any) has owned and used existing home as a principal residence for 5 of the last 8 years.
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1. First-Time Homebuyer: Up to $10,000 if the buyer (or buyer’s spouse if any) has not owned a principal residence during the three-year period before date of purchase; OR 2. Never-Occupied Property: Up to $10,000 for a principal residence if the property has never been previously occupied as certified by the seller.
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Income Restriction
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Yes. Tax credit begins to phase out for modified adjusted gross income (MAGI) over $125,000 (or $225,000 for joint filers). No tax credit at all for MAGI over $145,000 (or $245,000 for joint filers).
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No
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Maximum Purchase Price
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$800,000.
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N/A
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Refundable
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Yes. Any amount of the tax credit not used to reduce the tax owed may be added to the taxpayer’s tax refund check.
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No
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Repayment
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No repayment required if the buyer owns and occupies the property for at least 36 months after purchase.
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No repayment required if the buyer owns and occupies the property for at least two years immediately following the purchase.
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Multiple Buyers (not married to each other)
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Tax credit may be allocated between eligible taxpayers in any reasonable manner.
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Tax credit must be allocated between eligible taxpayers based on their percentage of ownership.
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Maximum Credit for All Taxpayers
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N/A
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$100 million for first-time homebuyers and $100 million for never-occupied properties, both on a first-come-first-served basis.
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Reservations of Credit
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N/A
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Yes. Buyer may reserve credit before close of escrow for a property that has never been occupied by submitting a certification signed by buyer and seller stating they have entered into an enforceable contract between May 1, 2010 and December 31, 2010, inclusive.
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When to Claim
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Full tax credit may be claimed on 2009 or 2010 tax returns.
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1/3 of total tax credit may be claimed each year for 3 successive years (e.g. $3,333 for 2010, $3,333 for 2011, and $3,333 for 2012).
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Tax Agency
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Internal Revenue Service (IRS).
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Franchise Tax Board (FTB).
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How to File
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First-Time Homebuyer Credit and Repayment of the Credit (IRS Form 5405) to be filed with tax returns
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Submit application to the FTB to obtain Certificate of Allocation. The FTB may prescribe additional rules and procedures to carry out this law.
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Other Restrictions
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Cannot be an acquisition from related persons as defined; cannot be an acquisition by gift or inheritance; and buyer cannot be a non resident alien.
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Cannot be an acquisition from related persons as defined; buyer or spouse must be 18 years old; buyer cannot be another taxpayer’s dependent; credit is allowed for only one qualified principal residence; and credit allowed cannot be a business credit under Cal. Tax & Rev. Code § 17039.2.
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Legal Authority
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26 U.S.C. section 36.
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Cal. Rev. & Tax Code section 17059.1 (as added by Assembly Bill 183).
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Date of Enactment
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November 6, 2009 (as revised).
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March 25, 2010.
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More Information
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IRS Web site at: http://www.irs.gov
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FTB Web site at: http://www.ftb.ca.gov
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Information compiled by the California Association of Realtors®. David Westall, Realtor and Tahoe Riverfront Realty, Inc. do not give tax advice. Please consult a qualified tax professional for all tax related matters including eligibility for home purchase tax credits.
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