| Homebuyer Tax Credits |
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A QUICK GUIDE TO TAX CREDIT PROGRAMS Because home building and home buying are the foundations of a vibrant economy, in the past few months, both the United States government and the State of California have enacted tax credit programs for first - time homebuyers to help spur our economy's recovery. However, this unique opportunity may have a short window of time, so those interested in a new or resale home will need to take this into consideration. As a builder for over two decades, I have not seen such a compelling point in our housing cycle to purchase a home: low interest rates, affordable homes, and now state and federal tax credits. Both are very different programs, but some homebuilders here in San Bernardino County are already working with homebuyers to help them realize their American Dream of homeownership by taking advantage of these historic programs. STATE OF CALIFORNIA HOUSING TAX CREDIT The California tax credit is available for qualified buyers who purchase a qualified principle residence before March 1, 2010. A qualified buyer is defined as a taxpayer who purchases a singlefamily residence, whether detached or attached, that has never been occupied, that is purchased to be the principal residence of the taxpayer for a minimum of two years, and that is eligible for the homeowner's exemption under California Revenue and Taxation Code Section 218. A qualified principal residence means a singlefamily residence, whether detached or attached, that has never been occupied and is purchased to be the principal residence of the taxpayer for a minimum of two years and is eligible for the property tax homeowner's exemption. Buyers must apply for the credit allocation from the California Franchise Tax Board and applications will be reviewed and credit allocations made on a first-come, first-served basis because the State Tax Credit program has a spending cap - so that only a certain number of California homebuyers will benefit. Once the $100,000,000 the state has allocated for this tax credit is allocated to homebuyers, the credit will be no longer available. With the California program, the state will allow qualified new home buyers a total tax credit amount equal to either five percent of the purchase price or $10,000, whichever is less. Taxpayers must apply the total tax credit in equal amounts over three successive taxable years with a maximum of $3,333 per year beginning with the taxable year in which the new home is purchased. FEDERAL HOUSING TAX CREDIT Likewise, the Federal Tax Credit is available to first - time homebuyers. To qualify for the tax credit, a home purchase must occur before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the homeowner. For the Federal tax credit, a first-time homebuyer is defined as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the homebuyer and his or her spouse. The tax credit is equal to ten percent of the home's purchase price up to a maximum of $8,000. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts. The most important aspect of the Federal tax credit is that it does not have to be repaid, unlike the previous tax credit which was essentially an interest-free loan. This tax incentive is a true tax credit. However, homebuyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. At this writing, the California tax credit could be described as a 'work in progress' while participating in the Federal tax credit program is fairly simple. Homebuyers claim the tax credit on their federal income tax return by completing IRS Form 5405 to determine the tax credit amount then claiming this amount on Line 69 of their 1040 income tax return. No other applications or forms are required, and no pre-approval is necessary. However, home buyers will want to be sure that they qualify for both credits under the income limits and first-time home buyer tests. Remember, this is just a quick guide to these tax credits. If you feel you might qualify, check out the State of California tax credit program at the California Franchise Tax Board website at www.ftb.ca.gov or call 888.792.4900 and press 5. To learn more about the Federal tax credit program, visit the National Association of Home Builders' dedicated www.FederalHousingTaxCredit.com website. ***** PUBLISHED MARCH 21, 2009
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