Federal Homebuyer Tax Credit Expires Today - State Credit to Take its Place

Today, April 30th, if you are not in contract to buy a home by days end, the Federal Homebuyers Tax Credit will have expired. If you are in contract you have until June 30th to close to take advantage of the tax credit.

Despite this, we all knew it was coming and cannot expect or want the Federal government subsidizing the housing market indefinitely. With that said, there is a California State tax credit that is being offered. This tax credit however is a little different than the federal tax credit most are familiar with.

Because I am not a tax preparer I highly recommend seeking advise of a licensed tax preparer, a CPA, or your attorney if you plan on taking advantage of this program. This post will break it down outlining the fundamentals of this State tax credit.

The credit begins May 1st of this year and pulls from a fund of 200 million offering a credit of 10,000 dollars for homebuyers. The program is said to run until the end of 2010, however if you are in contract to buy a home by the end of the year you can qualify for this credit if you close by August 1, 2011.

It is important to note that how this credit is applied. The tax credit is equal or lesser to 5% of the purchase price or 10,000 dollars, which is taken in equal installments over a three year period. This is for primary residences, and requires the homeowner to live in the home as their primary residence for at least two years or else the tax credit is forfeited and they must repay it.

This final note is an important feature as it may result in a sort of prepayment penalty enforced by the State for homeowners that buy, take advantage of this credit, and then for whatever reason look to move. It will be interesting to see how this detail plays out with the implementation of the credit.

One final note... with the Federal tax credit still available to people that get into contract by end of business today, there is a chance of double dipping and taking advantage of both the Federal and State tax credits. If this is your plan make sure you have a good tax preparer and or CPA.

Any questions or concerns are obviously welcome here.