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California Still Accepting Applications For Homebuyer Tax Credit

07/12/2010

California is still handing out tax credit to homebuyers despite intense competition among applicants and an incomplete processing system. The bill was signed into immediate effect under emergency legislation on March 25th, 2010, and offers tax credits of up to $10,000 to first-time California homebuyers who purchase a residence between May 1, 2010, and December 31, 2010. The bill also offers tax credits to homebuyers who purchase previously-unoccupied or new homes between May 1, 2010, and August 1, 2011. The bill allocates a total credit limit of $100 million to first-time homebuyers and an additional $100 million to new home buyers. Altogether, California will provide $200 million in tax credits to residents.

This goal is not far out of reach. Since May 1, the California Franchise Tax Board has accepted over 23,000 requests for the first-time homebuyer credit, totaling more than the $100 million allocated limit, though they have not yet processed any applications. The FTB insists that they'll accept at least 7,000 more applications to make up for duplicates and unqualified requests.

The new home tax credit has not seen such rapid success. New home sales dropped over 30% nationwide in May, and California was no exception. About $50 million of the allotted $100 million has been applied for.

As unusual as it may sound, the FTB does not yet have a system in place to process these applications. According to an announcement posted on the FTB website in mid June, a computer system is currently in development to handle the extremely high number of credit requests. The tax credits will be dispersed on a first-come, first-served basis, which indicates that the FTB is, at least, tracking the dates on which applications are received.

The California tax credit is equal to 5% of the home's purchase price, up to $10000, which is noticeably higher than the $8000 federal tax credit extension plan. The tax credit is not delivered as a lump refund. Homebuyers must take the credit in three parts over three successive taxable years, and each part must be equal to no more than $3333. The cycle of three years begins when the home is purchased.

The FTB will provide tax credits under the first-time homebuyer program and the new home program until the $100 million caps are reached. The first-time homebuyer portion of the bill was intended to motivate hesitant first-time homebuyers to step forward and purchase, and on this front, the program has been highly successful. The new home portion of the bill was intended to create construction jobs through the development of new residences, and despite fewer credit requests than desired on this front, the outlook is good. After the success of the federal homebuyer tax credit program, it is no surprise that a similar bill has passed in California, and other states--such as New Jersey, which recently passed a $15,000 tax credit into law--have begun to follow suit. For updates and additional information, check out the California Franchise Tax Board's official website.

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