Tax Credit Chart
Many of you have asked me about the implications of the Federal Tax Credits as well as the California Tax Credits for first time homebuyers. I have sent this out as a separate email, but I thought I’d include it in this newsletter as a refresher because it’s such pertinent information if you are currently thinking of buying your first home. Also, there is a movement among lenders to allow buyers to use part or all of these credits toward downpayment and/or closing costs. This is not actually in effect yet, but it may be soon, and I’ll keep you posted!
| HOMEBUYER TAX CREDIT | FEDERAL | CALIFORNIA |
| Amount of Tax Credit | 10% of purchase price not to exceed $8,000. | 5% of purchase price, not to exceed $10,000. Maximum tax credit for all taxpayers is $100 million to be allocated on a first come, first served basis. |
| Principal Residence | Yes. Property purchased must be the taxpayer’s principal residence which is generally the home the taxpayer lives in most of the time (26 U.S.C. § 121). | Yes. Property purchased must be a qualified principal residence and eligible for the homeowner’s exemption from property taxes (Cal. Tax & Rev. Code § 218). |
| Type of Property | House, condominium, townhome, manufactured home, apartment cooperative, houseboat, house trailer, or other type of property located in the U.S. | Single-family residence, whether detached or attached, condominium, cooperative project unit, houseboat, manufactured home, or mobile home. |
| First-time Homebuyer | Yes. The buyer (and buyer’s spouse if any) must not have owned a principal residence during the three-year period before date of purchase. | No. The buyer need not be a first-time homebuyer. |
| Unoccupied Property | No. Property may have been previously occupied or not. | Yes. Property must have never been previously occupied as certified by the seller. |
| Minimum Occupancy Requirement | Must be the buyer’s principal residence for 36 months after purchase, otherwise credit must be repaid. | Must be the buyer’s principal residence for 2 years after purchase, otherwise credit must be repaid. |
| Income Restriction | Yes. Tax credit begins to phase out if modified adjusted gross income is over $75,000 (or $150,000 for joint filers). No tax credit at all if modified adjusted gross income is over $95,000 (or $170,000 for joint filers). | No. |
| Date of Purchase | January 1, 2009 to November 30, 2009, inclusive.(Note: A repayable $7,500 tax credit is available for purchases from April 9, 2008 to December 31, 2008.) | March 1, 2009 to February 28, 2010, unless $100 million funding runs out. |
| Refundable | Yes. Any amount of the tax credit not used to reduce the tax owed may be added to the taxpayer’s tax refund check. | No. |
| Repayment | The buyer need not repay the tax credit if the buyer owns and occupies the property for at least 36 months after the purchase. | The buyer need not repay the tax credit if the buyer owns and occupies the property for at least two years immediately following the purchase. |
| Multiple Buyers(not married to each other) | The $8,000 tax credit may be allocated between eligible taxpayers in any reasonable manner. | The $10,000 tax credit may be allocated between eligible taxpayers based on their percentage of ownership. |
| Maximum Credit for All Taxpayers | N/A | $100 million. |
| When to Claim | Full tax credit may be claimed on 2008 or 2009 tax returns. | 1/3 of total tax credit may be claimed each year for 3 successive years (e.g. $3,333 for 2009, $3,333 for 2010, and $3,333 for 2011). |
| Tax Agency | Internal Revenue Service (IRS). | Franchise Tax Board (FTB). |
| How to File | First-Time Homebuyer Credit(IRS Form 5405) to be filed with 2008 or 2009 tax returns | Specific procedure for claiming credit includes completing an Application for New Home Credit (FTB Form 3528-A). |
| When to File Form | Form 5405 must be filed with 2008 or 2009 tax returns. | FTB Form 3528-A must be faxed by escrow to the FTB within one week after close of escrow and filed with the buyer’s 2009 or 2010 tax returns. |
| Exceptions | Acquisitions by gift or inheritance, acquisitions from related persons as defined, and buyers who are nonresident aliens. | Credit allowed is not a business credit under Cal. Tax & Rev. Code § 17039.2. |
| Legal Authority | 26 U.S.C. section 36. | Cal. Rev. & Tax Code section 17059 (as amended by Senate Bill 15). |
| Date of Enactment | February 17, 2009. | February 20, 2009. |
| More Information | IRS website at http://www.irs.gov/newsroom/article/0,,id=204671,00.html. | FTB website at http://www.ftb.ca.gov/individuals/New_Home_Credit.shtml which includes a tally of the $100 million original funding that is still available. |
California Association of REALTORS®
Copyright ã 2009 CALIFORNIA ASSOCIATION OF REALTORS â (C.A.R.). Permission is granted to C.A.R. members only to reprint and use this material for non-commercial purposes provided credit is given to the C.A.R. Legal Department. Other reproduction or use is strictly prohibited without the express written permission of the C.A.R. Legal Department. All rights reserved.
The information contained herein is believed accurate as of April 13, 2009. It is intended to provide general answers to general questions and is not intended as a substitute for individual legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney.
HOMEBUYER TAX CREDIT CHART