Let's see, if you're a first time home buyer in California, and you buy a newly-constructed home, you could get up to $18,000 in tax credits! But even if you're not a first-timer you can get the California credit. And that's a sweet ten grand.
California's credit (5% of the purchase price or $10,000, whichever is less) is designed to give a little kick to the home building industry--which may not be so great for those trying to sell a "used" home in the state next year. But buyers win two ways--first, the credit applies to anyone--there are no income restrictions--who buys a brand-new home. It's paid out over a three year period, and doesn't have to be paid back as long as you live in the home for at least two years.
But what if you want a home with character, a home in an established neighborhood, and not a cookie-cutter tract product? Well, you won't be able to take the credit, but you will be able to use it--as a bargaining tool. The sellers know you'd be giving it up in order to buy their home. So perhaps they can throw in a piece of furniture you like, help you with closing costs, or leave that awesome hot tub on the deck when they go.
First come, first served. That's right, the credit lasts from March 1st of this year until March 2010. OR WHENEVER CALI RUNS OUT OF MONEY. $100 million was allocated to the program and when it's gone, it's gone. So make like it's Black Friday at Best Buy and hit the ground running. Get your loan in place (FHA is probably your best bet if you have credit boogers), round up your Realtor, and find that new house (or summon your magic bargaining powers and go looking for a used one). And close on that sucker as soon as you can before the money runs out!
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7 Responses to "California's Generous $10,000 Credit For All Home Buyers (Not Just First-timers)"
The credit had to be applied for asap--like in March when it went into affect. That's why I said to hit the ground like it was Black Friday at Best Buy. Like when you bought your property. According to the state, "As of July 3, 2009, we are no longer accepting new home credit applications. As shown in the numbers below, we have received over $100 million in new home credit applications and more than 12,000 applications." http://www.ftb.ca.gov/individuals/New_home_Credit.shtml
what if i've already bought a home (FHA) and closed on Jan of this year. can I still qualify for the $10k tax credit?
Wow - this is amazing. Makes me wish I had waited a few more years to buy my home. Well this and the fact that the market in LA has collapsed. Great deal for those who are in the market now with all these low rates.
Prefab as in mobile home? Or prefab as in you put it together yourself? Manufactured housing counts like "real" housing as long as it has an 8 point foundation and meets a few other guidelines (for instance it can't be a single-wide).
Very helpful and informative article, thank you! I am assuming this credit doesn't apply to pre-fab homes, does it?
A lot. If you are a first-timer and meet the Mortgage Credit Certificate guidelines in your area (there are income restrictions and the price of your home is limited) you get it all. Here's a link to my post on MCCs for more information on this program:
http://www.mortgagecreditproblems.com/blog/mortgage-credit-certificate-programs-free-money-for-first-time-home-buyers/
With an MCC, the IRS allows you to not only deduct your mortgage interest, it gives you a credit of up to 20% of your mortgage interest against your tax liabilities. For example:
* You buy a $275,000 house with a mortgage of $250,000 at 6.00% for 30 years with monthly principal and interest payments of $1,499 and an MCC credit rate of 20%.
* In the first year, you pay a total of $14,916 of interest on your mortgage loan. Because you have an MCC, you could receive a federal income tax credit of $2,983 (20% of $14,916). If your income tax liability is $2,983 or greater, your will receive the full benefit of the MCC tax credit. If the amount of your tax credit exceeds the amount of your tax liability, the unused portion can be carried forward (up to three years) to offset future income tax liability.
* The remaining 80% of mortgage interest, or $11,933, qualifies as an itemized income tax deduction.
So if you're in a 15% bracket, that puts $1790 back in your pocket. Add in the $8,000 from the feds and the $10,000 from California and you get a total benefit of $22,773! The California money is paid out over three years but you can take the fed credit on either your 08 or your 09 return.
So if you're a first time buyer, in California, and you move really really fast and buy a brand-new house, and get that mortgage credit thing, how much can you save in taxes?