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California extends homebuyer tax credit

April 26, 2010 12:00:00 AM PDT
Last month home sales took the biggest monthly jump in 47 years, a strong sign the housing crisis is easing up. Some experts believe the federal home buyer tax credits are one reason for the better numbers. New home construction is back and builders are keeping busier these days.

"We have seen a difference in our traffic since the tax credits have come on. What it has helped people to realize is that maybe right now it is not going to get any better than this," said KB Homes president Steve Ruffner.

Mortgage lenders are getting busier as well, partly because the economy is getting better and partly because of the home buyer tax credits the federal government is offering.

"I don't think all of our activity can be attributed to the tax credit, but I think it is certainly part of it," said Community West Bank CEO Lynda Nahra.

The federal tax credit is for $8,000 for first time home buyers and $6,500 for current homeowners. Unfortunately those credits will come to an end this Friday.

"Consumers are very interested in that and they want to take advantage of it before it disappears," said Nahra.

But not to worry, California is going to have its own home buyer tax credit starting in May. On May 1, Californians who buy their first home, or anyone who buys a brand new home, can qualify for a $10,000 tax credit on their state taxes.

There are some differences between the California tax credit and the federal version. First off, it's for state taxes not federal. If you qualify for the full $10,000 it will be spread out over three years, which means you would get up to $3,333 per year. And you get that only if it is equal to or less than your annual taxes.

The unused credit cannot be carried over to next year's taxes. And if you qualify as a first time home buyer and you're buying a new home, you can only get one of the credits.

For the new home to qualify, it must be new construction that has never been occupied. The taxpayer must occupy the home as their principal residence for a minimum of two years.

"The California tax credit will apply to new construction," said Ruffner. "The homeowners would get up to a $10,000 tax credit, which I think will be helpful to get them to make their decision."

And you can decide if that new home is a single family home, a condominium or a co-op. It also can be a manufactured home, a mobile home, even a houseboat, if it's new.

The state is reminding consumers that buying a home is a big commitment so don't be lured into making a rash decision because you might miss out on free money. Instead make sure that buying a home, with or without credits, is in your best long-term interests.


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