California State Income Tax Credit of $10,000

I’m sure you’ve heard considerable discussion about how the new State Budget recently passed by the Legislature will increase taxes. Far less publicized is a provision in the same legislation that could allow those considering the purchase of a new home to not only offset the tax increases, but to potentially even come out ahead. This proviso allows those who purchase a never before occupied home between March 1 2009 and March 1 2010 to claim a $10,000 tax credit on their state income tax return. The credit is claimed over three years ($3,333.33 per year) and does not have to be repaid if the buyer stays in the home for two years. Unlike the $8,000 Federal first time buyers’ credit we have previously discussed, this one does not have any limitation on the buyer’s income. It can be combined with the Federal Credit so that an individual qualifying under both programs could potentially receive $18,000 in income tax credits. This certainly won’t solve all of our problems, but if you were considering a purchase of a new home, combined with reduced prices and low interest rates, it certainly gives you a reason to consider buying in the near future.

Summary of the two tax credit programs

California	Federal
$10,000 credit taken over three years ($3333.33 per year)	$8,000 credit taken in lump sum
For purchase of never before occupied home	Any home qualifies
Any homebuyer qualifies	Homebuyer must not have owned a home in the last three years
No limits on buyer’s income	Credit reduced if buyer’s income exceeds $75,000 for single or $150,000 for couple
Does not need to be repaid if buyer stays in home for two years	Does not need to be repaid if buyer stays in home for three years
Credit cannot exceed tax owed	Credit can exceed tax owed resulting in a refund
Effective March 1 2009 to March 1 2010	Effective January 1 2009 to November 30 2009, retroactive.

For further details, please contact Carla Craig at 310-200-3219 or email: ccraig@scgmac.com