If the federal $8,000 tax credit, low home prices and foreclosure opportunities were not enough to motivate you that now is the best time to buy, then maybe this newest incentive will put you over the edge. Last week, Governor Arnold Schwarzenegger signed a bill called AB 183 into law, offering a First Time Homebuyer Tax Credit of 5% or $10,000 to California homebuyers.
A first time homebuyer is defined as an individual, or an individual’s spouse, with no previous ownership in a principal residence for three years before the date of purchase. The beauty of this tax credit is that it is not restricted to first time homebuyers. Previous homebuyers are also eligible as long as they are investing in a newly built home or previously unoccupied home.
The credit is equal to 5% of the purchase price, or $10,000 – whichever is less. It must be claimed in equal amounts over three years, beginning with the year of purchase.
The credits will be awarded on a first come, first serve basis. Be aware that last year, the funds for the tax credit ran out after four months. These tax credits are no different and will go quickly so your borrowers have to get their applications in as soon as possible. The credit is extended from May 1, 2010 to December 31, 2010.
You can take advantage of both credits if you are in escrow by April 30th and close escrow by June 30th. The best part is that this credit can be used along with the federal $8,000 tax credit, giving you all the more reason to buy that home you’ve been dreaming of.
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