California has initiated its own homebuyer tax 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.
Separate from the California tax credit is the federal tax credit. The federal homebuyer tax credit will expire soon. If your clients want to take advantage of this tax credit, they must act fast. The tax credit is 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.
If you have any questions about how the California or federal tax credit may benefit your clients, please call me today.