With most new homebuilders willing to cooperate with brokers and agents in the representation of a new home purchase, this is a great time to make sure that agents get the word out about the availability of current Federal and State tax credits to both their past and potential clients. The tax credits offered today, along with historically low interest rates, provide unprecedented opportunities for today’s homebuyers.
The California Association of REALTORS® provides this chart below
HOMEBUYER TAX CREDIT
|Amount of Tax Credit||10% of purchase price not to exceed $8,000.||5% of purchase price, not to exceed $10,000. Maximum tax credit for all taxpayers is $100 million to be allocated on a first-come, first‑served basis.|
|Principal Residence||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).||Yes. Property purchased must be a qualified principal residence and eligible for the homeowner’s exemption from property taxes (Cal. Tax & Rev. Code § 218).|
|Type of Property||House, condominium, townhome, manufactured home, apartment cooperative, houseboat, houstrailer, or other type of property located in the U.S.||Single-family residence, whether detached or attached, condominium, cooperative project unit, houseboat, manufactured home, or mobilehome.|
|First-time Homebuyer||Yes. The buyer (and buyer’s spouse if any) must not have owned a principal residence during the three-year period before date of purchase.||No. The buyer need not be a first-time homebuyer.|
|Unoccupied Property||No. Property may have been previously occupied or not.||Yes. Property must have never been previously occupied as certified by the seller.|
|Minimum Occupancy Requirement||Must be the buyer’s principal residence for 36 months after purchase, otherwise credit must be repaid.||Must be the buyer’s principal residence for 2 years after purchase, otherwise credit must be repaid.|
|Income Restriction||Yes. Tax credit begins to phase out if modified adjusted gross income is over $75,000 (or $150,000 for joint filers). No tax credit at all if modified adjusted gross income is over $95,000 (or $170,000 for joint filers).||No.|
|Date of Purchase||January 1, 2009 to November 30, 2009, inclusive.
(Note: A repayable $7,500 tax credit is available for purchases from April 9, 2008 to December 31, 2008.)
|March 1, 2009 to February 28, 2010, unless $100 million funding runs out.|
|Refundable||Yes. Any amount of the tax credit not used to reduce the tax owed may be added to the taxpayer’s tax refund check.||No.|
|Repayment||The buyer need not repay the tax credit if the buyer owns and occupies the property for at least 36 months after the purchase.||The buyer need not repay the tax credit if the buyer owns and occupies the property for at least two years immediately following the purchase.|
(not married to each other)
|The $8,000 tax credit may be allocated between eligible taxpayers in any reasonable manner.||The $10,000 tax credit may be allocated between eligible taxpayers based on their percentage of ownership.|
|Maximum Credit for All Taxpayers||N/A||$100 million.|
|When to Claim||Full tax credit may be claimed on 2008 or 2009 tax returns.||1/3 of total tax credit may be claimed each year for 3 successive years (e.g. $3,333 for 2009, $3,333 for 2010, and $3,333 for 2011).|
|Tax Agency||Internal Revenue Service (IRS).||Franchise Tax Board (FTB).|
|How to File||First-Time Homebuyer Credit
(IRS Form 5405) to be filed with 2008 or 2009 tax returns
|Specific procedure for claiming credit includes completing an Application for New Home Credit (FTB Form 3528-A).|
|When to File Form||Form 5405 must be filed with 2008 or 2009 tax returns.||FTB Form 3528-A must be faxed by escrow to the FTB within one week after close of escrow and filed with the buyer’s 2009 or 2010 tax returns.|
|Exceptions||Acquisitions by gift or inheritance, acquisitions from related persons as defined, and buyers who are nonresident aliens.||Credit allowed is not a business credit under Cal. Tax & Rev. Code § 17039.2.|
|Legal Authority||26 U.S.C. section 36.||Cal. Rev. & Tax Code section 17059 (as amended by Senate Bill 15).|
|Date of Enactment||February 17, 2009.||February 20, 2009.|
|More Information||IRS Web site at http://www.irs.gov/newsroom/article/0,,id=
|FTB Web site at http://www.ftb.ca.gov/
individuals/ New_Home_Credit.shtml which includes a tally of the $100 million original funding that is still available.
There are 5,668 tax credit applications submitted to date, resulting in over one-half of the current $100 million tax credit already having been claimed. Assembly Bill 765 was recently introduced and, if passed, will provide an additional 20,000 taxpayers the opportunity to take advantage of the popular new home California State income tax credit of up to $10,000. AB 765 calls for increasing the existing $100 million California new home tax credit program cap to $300 million. If AB 765 becomes law, it estimates 30,000 new homebuyers would benefit from the program.