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Good news for SF Bay Area and Silicon Valley home buyers

When the California State Budget for 2009-2010 passed back in February of 2009 it included a $10,000 tax credit to buyers of new construction as follows:

• Eligible period – from March 1, 2009 to to February 29, 2010 (or until the funds run out).
• Qualified buyer is someone purchasing a primary residence.  Does not have to be a first time home buyer.
• The purchase must be for a primary residence that has never been lived in.
• Types of residence – Single family residence, condominium, unit in a cooperative project, houseboat, manufactured unit, mobile home as long it is eligible for the homeowner’s property tax exclusion.
• Owner built property – does not qualify because it is not ”purchased”
• The credit is calculated based on the lessor of 5% of purchase price or $10,000.
• Cannot be taken if taxpayer will not take occupancy within two years of close of escrow.
• Credit is taken over three years.  Cannot be carried forward.  Use it or lose in the applicable year.  No refund of excess to taxpayer.
• Only $100 million dollars have been allocated to fund this credit and is based on first-come first-served.  Once the allocation is used up, the tax credit is gone.  As of May 27, 2009 requests have been received for  just over $72.5 million. Here is the link to check the status:

http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml#def2

Important steps to claim the tax credit:

• State hopes to mail out confirmation forms of the allocation of the credit to the taxpayers by May 1, 2009.
• Form 3538-A must be completed by appropriate parties (Seller and Buyer) and then faxed to the Franchise Tax Board within seven days after the close of escrow of the purchase.
• This form can only be faxed by the escrow officer.
• The day after the close is day one and must be faxed within seven calendar days.
• Must be faxed to fax number listed on instructions to the form.
• CANNOT be mailed, or faxed to another number.
• Must fax one form at a time.  Do not fax more than once.
• Copy of completed form to be given to buyer for their records.
• The fax number will be disconnected once the $100 million has been fully allocated.

This tax credit can be paired with the Federal Tax Credit for First Time Home Buyers. That represents a total savings of $18,000 for First Time Home Buyers.