California Issues New Construction Tax Credit for Qualified Homebuyers

americandreamIn order to stimulate purchases of newly constructed homes as well as encouraging home ownership; the State of California has issued a (up to) $10,000 tax credit for homebuyers of new contruction properties.
 
Here are the details of the plan:
 
1)  This credit only applies to new homes that will be used as a primary residence and is limited to the first 10,000 new home purchases.
 
2)  The credit is for $10,000 or 5% of the home’s price, whichever is less.
 

3)  There is no down payment requirement to receive the $10,000 tax credit.
 
4)  There are no maximum income limitations so any buyer purchasing a new home can qualify.
  
5) The $10,000 tax credit is just that, a credit, not a loan, so if the home remains your primary residence for two years, you do not have to pay any portion of the tax credit back. If you sell the home in less than two years, then it has to be paid back at time of sale.
  
6) The new home cannot be located outside of the United States and it cannot be inherited property or a gift.

Federal Tax Credit for Qualified First Time Home Buyers – Purcahsed between

This post addresses the Federal Tax Credit for Qualified First Time Home Buyers.  Look for new post for California Tax Credit.

Note that the Federal and California tax credits are very different from each other, and the methods for claiming the credit are likewise very different.

The good news is that the first time home buyer credit allows qualifying home buyers who bought their homes between April 8, 2008 and December 1, 2009 to claim their first home buyer tax credit.

This summary is provided for general information only and does not apply to any individual situation. Remember to advise all buyers who are interested in qualifying for either or both of these credits to consult with their own tax advisors.

FEDERAL TAX CREDIT (FIRST-TIME BUYERS ONLY)

Amount: $8,000 if home purchased in 2009, but no more than 10% of the purchase price of the home (half that amount if married filing separately). $7,500 if purchased before 2009.

Expires: December 1, 2009

Only First-Time Homebuyers Can Claim the Credit: In general, buyers can claim the credit if they are a first-time homebuyer.

 Buyers are considered a first-time homebuyer if:

  • They purchased their main home after April 8, 2008, and before December 1, 2009.
  • The buyer (and spouse, if married) did not own any other main home during the 3-year period ending on the date of purchase.

Main home. A main home is the one the buyer lives in most of the time. Not limited to new construction. It can be a house, houseboat, house-trailer, cooperative apartment, condominium, or other type of residence.

The Credit Cannot Be Claimed If:

  • The buyer’s modified adjusted gross income is $95,000 or more ($170,000 or more if married filing jointly).
  • The buyer is a nonresident alien.
  • The home is located outside the United States.
  • The buyer acquired their home by gift or inheritance.
  • The buyer acquired their home from a related person.

No Repayment of Credit: There is no repayment of this credit if the home is purchased in 2009. However, the buyer must repay the credit if the home ceases to be their main home within the 36-month period beginning on the purchase date. (Note: For homes purchased before 2009, the tax credit is subject to repayment rules.)