Tax Credits for California First-Time Homeowners
You are out of luck if you intend on applying now for the New Home or First-Time Buyer credit. The California Franchise Tax Board stopped accepting First-Time Buyer applications on Aug. 15, 2010, and on Aug. 14, 2011, for the New Home Buyer credit. However, you may reserve the credit if you qualify for the New Home Buyer Credit for the 2011 tax season. Both credits are available on a first-come, first-serve basis.
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California Tax Credit for Homebuyers
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The 2010 New Home and First-Time Buyer tax credits are available to homeowners who purchased a qualified principal residence on or after May 1, 2010 and before Jan. 1, 2011. The 2011 credits are available to you if you purchased a qualifying principal residence on or after Dec. 31, 2010 and before Aug. 1, 2011. The tax credit is limited to the lesser of 5 percent of the purchase price or $10,000. California applies the tax credits in equal amounts over three successive tax years or a maximum of $3,333 per year beginning in the tax year you purchased the home.
Qualifying for the Credit
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California allows one credit per taxpayer. In order words, you may not claim a $20,000 tax credit if you are a first-time home buyer purchasing a brand new home where no one has lived in it. Your home must be a single-family residence, eligible for the California property tax exemption. You must occupy the home as your principal residence for two years immediately following the purchase. To qualify for the New Home Buyer credit, the home you purchase must be a brand-new construction without anyone living in it and the seller must certify to this in order for you to receive the credit.
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Deadlines
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The California Franchise Tax Board only accepts applications for the First-Time Buyer and New Home credits via fax. However, the $100 million allocated to the First-Time Buyer credit is no longer available. While the $100 million allocated for the New Home Buyer credit is not fully exhausted, the Franchise Tax Board stopped accepting applications as of Aug. 14, 2011. To qualify for the New Home Buyer credit you would have needed to close escrow on or before July 31, 2011 and had an enforceable contract executed on or after Dec. 31, 2010.
Reserving the Credit
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While it may be too late to apply for the New Home, you may reserve a tax credit for the New Home Buyer credit for next year's tax season using a reservation request form. Reserving the New Home Buyer credit is critical to avoid missing out on the credit before approved funds become exhausted. You must include a copy of a signed contract and settlement agreement with your application. If you meet all requirements, you will receive a Certificate of Allocation, which will inform you of the maximum tax credit you may claim for each tax year. Homeowners who only qualify for the First-Time Buyer credit may not reserve the credit.
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