California’s New 2010 First Time Buyer Tax Credit: “Don’t Wait–$$$ Gift for first time buyers”

California has new legislation initiating tax credits with the intent of stimulating our economy. This is intended to cast a positive image onto our government to improve employment of related services and promote homeownership, but the process in collecting these credits is onerous, complicated, and even unavailable to many.

For “determined” first time buyers the new 2010 California tax credit is essentially a cash gift applied towards their California taxes. Don’t treat this lightly: this is a great program IF you are successful with your application. For approximately the first 10,000 applicants, a buyer purchasing a home over $200,000 will be able to qualify for a $10,000 tax credit that is spread over 3 years of state taxes. The best features are that there are NO income cap or purchase price restrictions that were in previous federal legislation. As long as a buyer resides in their home for two years, there is no payback requirement. This program begins for homes that close escrow beginning May 1, 2010. As soon as California’s $100,000,000 that was allocated for this program runs out, new credits will terminate. As of 5/13/2010 applications have been received for 57% of the state program.

There is a similar program for buyers purchasing new construction; the $100,000,000 allocated for this program is expected to last longer.

Due to the complicated nature of this application process I highly encourage first time buyers to work closely with their real estate adviser to make sure their application is properly processed. It is critical to have all components of the application in compliance in order to receive the credit.